See, @“Youdon’tsay,” your questions here suggest you do need a face-to-face with an expert versed in your state regulations, expectations, how probate is handled, etc.
Even at it’s simplest, there can still be issues you don’t anticipate. And in the process of drawing up your will, there are other quality of life issues you can specify, if you already haven’t- the POAs, medical power of attorney, how you wish things to be handled if you can’t manage your life. and more. It’s worth it to get a good attorney to guide you through.
If you have a life insurance with a large payout on your death and you own the policy, guess what happens when you die? It become a part of your estate. So if that payout is $1M, your estate just became $1M bigger. Every life insurance policy has 3 parties: insured, owner, and beneficiary. Things can get complicated.
Also, it’s a separate thread, but don’t ever list a kid under 18 as a life insurance beneficiary. My wife made that mistake as well. It’s a major major hassle to collect as a minor. My kid just turned 18, it’s a good thing I’m still alive to do all the paperwork since it’s so much easier to collect as an adult. He would have no recollection whatsoever that he even has insurance to collect.
It pays to whoever is the beneficiary. Many people do list their estate, but don’t do that if you don’t want it to go through probate. I list my kids (50% each) on my 401k, so that money would never be part of my estate. It will be paid directly to them. You can do the same for life insurance, bank accounts, IRAs. The more stuff that passes outside the estate, the smaller the estate and then sometimes there doesn’t even need to be a probated estate or you can use the easier process for smaller estate.
There is no “limit” on wills. There is a limit on the value of an estate that will not have to go through probate, which is a pain in the derriere if you die with money over the limit in your state. You can bypass all of that with a trust. Please consult an attorney. Using an on-line will is a penny-wise/pound-foolish proposition.
@BunsenBurner is correct, the life insurance payout is considered a part of the owner’s estate for estate/inheritance taxes, that’s why people who buy life insurance for estate tax purposes generally put it into an irrevocable insurance trust.
@twoinanddone - yes, the beneficiary gets the $$ tax-free. But the if the owner of the policy and the insured are the same person or the owner/insured gave the policy away within the so called 5 year rule… beware. There can be a tax trap. Google the “Goodman Triangle.” Of course, it only affect high net estates
There’s no giant life insurance policy. I promise y’all that our estate will be way less than the federal or my state’s limit. Nothing tricky about our situation. I don’t mind y’all venturing into life insurance speculation and other areas in case it helps other people, but it’s non-responsive to our situation.
Just be aware that the laws and procedures are different in each state. If you want to save money, I’d suggest that you do your own will online, but make an appointment with a lawyer to review it – you’ll save some money if you aren’t hiring a lawyer to draft the will, but you may save thousands more if you take the added precaution of having someone knowledgeable to look it over. I’d suggest consulting with a lawyer who specializes in probate in your state. The probate lawyers will have the experience of knowing what sorts of provisions become problematic down the line.
I have the legal knowledge to draft my own will, but I am in California where trusts are needed to avoid probate, and I did opt to pay a lawyer to draw up the documents for me. Partly to get around the procrastination problem-- the do-it-myself thing just wasn’t getting done – but also because it is not my area of expertise. It isn’t just the legalese, it is that added benefit of practical advice because it’s easy to put something in a will that is 100% enforceable, but difficult or inconvenient to implement when the time comes.
OK. I am primarily an estate planning and tax lawyer. It’s more or less an open secret that I don’t bring anywhere near enough value to justify my rates to a couple with one marriage, adult children who get along to whom they want to leave their money, and assets less than several million dollars that are mostly investments and their home. I don’t have comprehensive knowledge of what’s available online, but the online wills I have seen are not necessarily inferior to what I would draft for a couple like that.
Something important to note: For many couples, a will is often almost meaningless when the first spouse dies. They hold most of their assets in joint name, such that the surviving spouse automatically owns the asset outright when the first spouse dies. Assets not held jointly tend to be retirement accounts, the disposition of which at the owner’s death is governed by the owner’s beneficiary designation, not the owner’s will, unless the owner hasn’t filled out any beneficiary designation at all, or has designated his or her estate as the successor beneficiary (usually a mistake). For couples like that, unless the couple dies more or less simultaneously – which is rare but hardly unheard-of – it barely matters what the will says as long as it clearly designates an executor and provides that the executor need not provide a fiduciary bond.
You get into more see-a-lawyer territory after one spouse has died, if one or both spouses may not be competent to manage their finances, if there are multiple families involved, if there are family trusts in existence, if there is a closely-held business, if children are very young, if anyone has significant disabilities, or if the favored disposition pattern is unusual. And of course if there is a lot of wealth.
Everybody’s situation is different. So the real answer is “it depends.” For many, JHS gives good advice.
Proffesorplum has his experience, which is unique due to how assets where titled. If you have out of the ordinary situations, then professional advice is warranted. Probate can drag on due to specific waiting periods, contests, and lawyers. But a lot of probates can get wrapped up quickly if you stay on top of your lawyer.
Trust are fine, but they frequently “fail” because they aren’t managed as things change. For example, many banks won’t lend on a house in trust. So you take the house out, refinance, and then forget to put it back into trust. Guess what. That fancy trust is worthless as far as the house is concerned. Or people buy new assets and don’t put them into the trust.
Bottom line, nothing beats you own research and knowledge about your situation.
But find out what happens if you die and your spouse remarries. Quite possible that your kids get nothing if he dies first in the second marriage. . It could end up with the second wife and HER kids. It happens more frequently than you might think. So many scenarios that a well-versed attorney will address.
I put together an online will for my mother several years ago and when she passed away 2 years ago it seemed to work fine. As long a you keep it simple, you should be okay, in my opinion. I made sure that any asset that could have a beneficiary had the correct one/ones and the only asset that passed through the will was her house. I would definitely use a lawyer if you have a large estate or anything, no matter how small, out of the ordinary - like stepfamily.
Thanks for the honesty, JHS. I agree with your comments about a will, especially in my situation. My 401K has the beneficiaries set, as do my separate accounts. And so do his. Our kids are well into their 20s, making their own money. We won’t codify this, but they know that the first thing we’d want with the house is to give each other right of first refusal (I could see the older one coming back here and wanting the house), and let one buy the other out if one wants the house rather than selling it. But if they don’t want to deal with that it’s OK. I could see them keeping it as an investment property or selling it outright eventually.
The only complication might be down the road when my parents die, and I stand to gain some land, which I would want to go directly to my kids when I die. We’ll cross that bridge when we get there.
ETA: My favorite thing about cc is how helpful people are and how we bring a wide range of experiences. I know an online will sounds crazy for some of you with lots of assets and remarriages and health issues and other complicating factors, but our lives are pretty simple here.
I should have added that I work primarily in a state where the probate process is not terribly expensive or intrusive. It’s rarely in my clients’ interest to avoid subjecting assets to the probate process other than for privacy reasons. (Privacy is often reason enough of course. Probated wills are public documents here.)
There are other states, including popular ones like California and New York, where the probate process is much more intrusive and expensive for executors to manage. In those states, everyone with any meaningful assets ought to consider using a revocable trust in addition to a will. I have never looked at online versions of those. It would theoretically be possible to have a decent version of a very simple revocable trust online, but I can’t vouch for any. And anyone who lives in a state like that should probably be consulting with a lawyer to understand how to use his or her revocable trust effectively.
@rosered55 I believe it gets split three ways with my siblings. I would have to buy them out. In a couple of weeks, I am spending a week or so at my parents to get all their affairs in order and will find out for sure. I found out last week that no one has medical POA on my mom. Several years ago, when we were so focused on my dad and got things in order, this fell through the cracks. Ugh.
