Does everybody need a will? The straight answer is yes. That's true even for people who think they don't have a dime to leave to anyone. What if you were in an accident and died later of injuries, and your estate won a $1 million settlement? Who gets the money?
Admittedly, that's a little far out. You might get away without having a will if, say, you're a renter living on Social Security with no savings. If you have savings, a pay-on-death account will pass that money to named beneficiaries when you die.
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But there are hitches to any no-will scheme, says attorney Patrick Lannon of Bilzin Sumberg in Miami. To begin with, a random financial asset almost always turns up. Examples might be a rental deposit that's returned or a medical reimbursement. Those checks will be made out to the deceased. How do your heirs get them cashed?
If you had a will, you'd have named an executor to cash checks, pay off creditors and distribute any money or property to your beneficiaries. Without one, your heirs will have to ask a court to appoint a personal administrator. Usually, it will appoint your surviving spouse or a child. But you risk a family fight over who should be in charge.
Some couples try to go will-free by putting everything into joint names. Joint assets pass to the other owner automatically. So do assets with beneficiary forms, such as individual retirement accounts. But something is inevitably left out — typically, a car, Lannon says. Heirs would need an administrator to transfer title. Even if the joint-asset strategy works for the first death, what happens when the other spouse dies? He or she should make a will, which you both could have done from the start.
When there's no will, state law dictates who gets the house, car, savings and other assets. Those laws vary widely. A surviving spouse might get everything in one state but only one-third in another, with the rest going to your children. If you have no children, half might go to a spouse and half to your parents.
Lawyers are the best source for reliable wills. Your lawyer will also remind you that you need a durable power of attorney and a health care proxy, so someone can manage your finances and make medical choices if you're unable to do so yourself.
If you're allergic to lawyers, you can find free, state-specific will forms online. In most states (not all), handwritten wills are also accepted, provided that they were witnessed properly. DIY should be better than nothing. But be careful.
Jane Bryant Quinn is a personal finance expert and the author of How to Make Your Money Last. She writes regularly for the Bulletin.