Why You Need A Will

© 1998 by Michael C. Gray


It's amazing how many people in our society don't have a written will.

When people are wealthy, having a good estate plan makes an enormous difference to the survivors.

Remember when Howard Hughes passed away? He had many wills floating around. His estate was tied up for years, with the states arguing which one had jurisdiction over Hughes' assets and was entitled to the inheritance taxes.

In contrast, J. Paul Getty had a very orderly estate plan that was designed to keep its administration out of the public spotlight and was probably handled quickly and with minimal expense.

If an individual doesn't have a written will, the state of which he or she is a resident provides a will for him or her. The rules for the state-provided will are the laws of intestacy. Are the laws of intestacy for your state acceptable to you for administration of your estate? Maybe you should find out.

The only way you can be "in the driver's seat" for many important decisions after your death is to have a written will, perhaps together with a trust.

What are some of these decisions?

  1. Who will be the executor of your estate? You can prepare a trusted friend or family member, or a professional fiduciary you know, for handling the administration of your estate. It may be there are personal conflicts or an inability to handle financial matters that make a particular family member inappropriate as an executor. Just exclude that person from your list of potential executors.


  2. Who do you think should care for your minor children? Every person with minor children should have a will to make their wishes known about this critical decision.


  3. If the assets are to be used for the support of your minor children, how will they be managed? In most states, minor children can't own and manage their assets directly. The assets must be managed by a conservator/custodian, in trust, or in a uniform gifts to minors account. Some forms require court approval to use the funds for the benefit of the minor. This is another critical decision that should be made with legal guidance.


  4. Who do you want to inherit your property? You might want some of your property to go to a favorite charity. The only way to give it to someone outside the family is through a will, trust, or beneficiary designation.

    What if there are no family members left? If you don't specify your wishes, your property may go to the state. Is that what you want?

    Are there family members, such as aged parents or a disabled child, for which special provisions must be made?


  5. Do you wish to use tax advantages that are available for your family? Many important elections must be made in a will or trust. For example, leaving property outright to a surviving spouse "wastes" the amount that can be given federal estate tax free by a decedent, currently $625,000 and gradually increasing to $1 million in 2006. Property may be put in a special type of trust, called a QTIP (qualified terminable interest property) trust, to qualify for an election to claim the marital deduction, and yet designate who will receive the property after the death of the surviving spouse. This helps insulate the property in the event the surviving spouse remarries, so the property won't go for the benefit of the new spouse or the new spouse's children or grandchildren.

    Each person may transfer, directly or in trust, up to $1 million for the benefit of their grandchildren and avoid the "generation skipping tax" of an additional 55%. Special provisions should be made in the will or trust to exploit this election.

    Decedents with a family-owned business may be eligible for an estate tax deduction of up to $675,000. The deduction has an interplay with the unified credit, or lifetime exclusion amount, described in the first paragraph of this item. The will, trust and estate plan should be designed to exploit this deduction.


  6. The person writing the will can provide flexibility for their family in making decisions after death by providing disclaimer options in the will. Discuss this with your attorney.


  7. If you have a living trust, you should also have a will so that any property, except personal property and possibly your residence, that you didn't transfer to the trust during your lifetime goes into the trust at your death. This is called a "pour over will".


  8. Even when your property is held as community property or in joint tenancy, you should have a will to provide for the event that both spouses or joint tenants pass away in a common accident or within a short time of each other.


  9. Which of your beneficiaries do you wish to be responsible for paying for the estate and inheritance taxes, funeral expenses and administration expenses out of their share of the estate? You may make specific bequests of assets or amounts and residuary bequests of what's left. Should the persons who receive specific bequests be required to reimburse the estate for a share of the taxes and expenses?


This list is necessarily incomplete. I hope you can appreciate that the process of writing a will is a complex task which should be done with the help of a competent attorney, possibly with the input of your accountant and other advisors as an estate planning team. But, since it is your wishes you are trying to accomplish, you must be the team leader!

Since the tax and probate laws are constantly changing, as well as your family and financial situation, you should also review and update your will and estate plan periodically, at least every five years. Also, be sure to update your will when you marry or divorce or when you have a new child.

If you don't have an estate plan in place, now is the time to take action and get started! If you would like our help in this effort, call Mike Gray at (408) 918-3161.

For more articles and information about new tax developments, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.


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Michael Gray, CPA
2190 Stokes St. Ste. 102
San Jose, CA 95128
(408) 918-3162
FAX: (408) 998-2766
Hours: 8am - 5pm PDT Monday - Friday

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