Want to Protect Your Assets? You Need More Than a Will
Want to Protect Your Assets? You Need More Than a Will
Would you be comfortable leaving town knowing that your home was locked up, but your garage door was wide open? Probably not. So why would you create a will that protects some of your assets and not take further action to protect the rest?
It’s a myth that having a will means your estate and belongings will pass seamlessly to your heirs upon your death. This document has limitations that can have financial and emotional consequences for your loved ones.
We don’t want to suggest that having a will isn’t important, because it is. In fact, we always recommend that our clients execute one. It’s just that creating a will is only one part of a good estate plan, and it’s not enough to protect your assets.
Yes, You Need a Will
Creating a will is a responsible action no matter how many or how few assets you have. It’s in this document that you get to make known your wishes around a few key areas. For one thing, who do you want to inherit your belongings? Without a will, the court will decide on your behalf who inherits your probate assets, which are basically any assets that are in your name only at the time of your death. Naming those beneficiaries yourself takes that power out of the court’s hands.
Naming a personal representative is also part of drafting your will. The personal representative, who we used to call the executor, is the one who distributes your probate assets to beneficiaries and oversees some other parts of the probate process.
For parents of minor children, naming a guardian who will care for them in the event of your early death is one of the most important functions of a will.
Why a Will Isn’t Enough
A will provides insufficient protection for people who have a lot of assets, for several reasons. Which protections you’ll need depends on your specific situation.
Avoiding Probate
Probate is the process by which your property and belongings are transferred to your beneficiaries, and it’s not pleasant. It can be costly, stressful and time-consuming, making the grieving process even more difficult than it needs to be. It’s especially hard on the personal representative, who has to jump through a number of hoops in order to get the court’s permission to then distribute assets.
Probate is also public. The deceased’s will becomes public record, so it’s impossible to keep secret the details of what assets are passed to which people. That knowledge can cause conflict in some families, and sometimes even causes people to contest their loved ones’ wills.
Finally, probate is expensive! Court fees and attorney’s fees eat up part of the estate, and it sometimes proves to be more expensive to go through probate than it would have been to execute an estate plan that avoided probate.
Reducing Estate Taxes
Estate tax issues are relevant to many Massachusetts residents because of our relatively low exemption cap of $1 million per person. If your estate is worth more than $1 million at the time of your death, it will be subject to a substantial tax. Married couples who leave their estates to one another can defer the tax when the first spouse dies, but doing that doesn’t allow them to take full advantage of both spouse’s exemptions.
There are no protections created by a will that will reduce estate taxes and maximize a couple’s exemptions. Creating certain types of trusts is the best way to establish those protections.
Providing for Minor Children
Leaving money to a minor child is complicated here in Massachusetts. If a will leaves money to a minor, an adult must get the court’s permission to act as the child’s conservator and manage the money. (Even if the child has a living parent, that person must be approved by the court to be the conservator.) The conservator is then required to make an annual report to the court, which may in turn appoint someone to oversee the way the conservator is managing the money.
The system is set up to ensure that any money willed to a child is used for that child’s benefit, but that intervention isn’t always necessary. Plus, any costs associated with the court’s intervention come out of the money intended for the child. Another potential issue is that the minor receives all the money that’s left when he or she turns 18, which is a big responsibility for a young person to handle.
Establishing a trust for the child’s benefit eliminates court involvement altogether. The trust creator can specify the terms and name a trustee to manage the money until the child reaches a designated age, which may be well into adulthood.
Protecting Assets From Creditors
Because a will is public, creditors who are owed by the deceased can find out about the person’s estate and make claims against it. If he or she owed more in debts than the estate is worth, there will be nothing left for the family. Transferring assets through a will may also be detrimental for your beneficiaries, if they have outstanding debts of their own. Creditors can also find out about money that their debtors inherit and go after it.
Better Protecting Your Assets
A will is a powerful document, but it’s only one part of a complete estate plan. A lot of the loopholes that wills leave open can be closed using trusts. Depending on the type and conditions, trusts can be used to help you maximize estate tax exemptions, maintain privacy, provide for children and make sure your assets end up exactly where you want them to.
In addition to executing your will, our team can help you determine what plans you need to put into place to protect your assets and loved ones. Contact the Ladimer Law Office with all your questions about estate planning.