Everyone Should Have a Will
Chances are, you’ve spent plenty of your free time thinking about the money you’ll have available at retirement. But what have you done to plan out your estate? The sad truth is that most of us—some 70% of adult Americans—have neglected to write a will. Some think their assets are just too puny to worry about; others worry that the costs of writing a “last will and testament” are too high. But wills aren’t just vehicles for the wealthy or the morbid. If you’ve got a family and a home, not to mention a savings account, you should definitely have one.
Will Preparation Costs Vary
Cost is no excuse. While the average will drawn up by a lawyer typically runs from $500 to $1,000, you can get a simple will at a legal clinic for as little as $75 or create your own with an online vendor for even less.
Protect Minor Children
For most people, the first time in your life that a will becomes imperative is when you have children. Forget about your assets for a minute. In the terrible event that you and your spouse die at the same time without a will, it falls to a probate court judge to name a guardian for your minor children — not a pleasant prospect. That is why it is a crucial first step to name a guardian for your minor kids. Our experts recommend naming an alternate guardian in the document as well, in case something happens to your first choice.
Add Up Your Assets
Writing a will, of course, is also your chance to clarify who gets what in your estate. Before you can do that, however, you have to tally up your assets. That includes your house, your investment portfolio, the value of your retirement plan account(s), and the payout(s) from any life insurance coverage. After adding these things up, most folks discover that they are worth more than they initially suspected.
Name Executor and Beneficiaries
Once you’ve got your assets listed, you can decide what you want to leave to whom and who will be executor of your estate. One important caveat: make sure that the beneficiaries listed in your will match the beneficiaries you name for your insurance policy and for your 401(k) and any other retirement accounts. If not, the beneficiaries named in these other documents will be the ones who get the money.
Should You Create a Trust
Now, if you want to do any more complex estate planning, chances are you’ll have to set up a trust, which isn’t cheap. They cost as much as $2,000 to $3,000 or more. The primary reason people go to this kind of trouble is to protect their heirs from having to pay hefty estate taxes that can turn their carefully built nest egg into chicken feed. Or to protect their heirs from themselves, if they are, to put it kindly, not very financially astute.
Federal Estate Tax
Remember: for every dollar you leave behind over the unified federal gift and estate tax exemption amount ($5.43 million for 2014), the IRS will take 40 cents for the federal estate tax.
Update Your Will Regularly
Once you have a will in place, don’t forget to update it regularly. You’ll need to amend it whenever there is a big change in your family’s circumstances — a birth, a death or marriage, or even if you move out of state. A will might seem like a hassle, but that is nothing compared with the hassles your heirs will experience if you die without one.
March 17, 2015
By: Bill Bischoff
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