Do you have a will?

One of the most common oversights that financial planners see with new clients is a lack of estate planning. The term “estate planning” means the documents that govern how your assets are handled and/or disseminated if you are incapacitated or die. At the very least everyone should have a will. But we commonly encounter individuals who have not bothered to create a will for various reasons. The two most likely reasons are “I never got around to it” and “we can’t decide who will be the guardian for our children” (wills generally include a nomination of a guardian for minor children.) Not having a will, however, means dying “intestate”, and thus leaving the decision of how your assets are divided up to the state.

Some assets come with a built-in inheritor. For instance when you open any kind of retirement account you are asked to name a primary beneficiary. Also any asset held as “joint ownership with rights of survivorship” will automatically go to the surviving joint owner. But many assets in your individual name have no clear beneficiary unless you name one in your will.

In Massachusetts, as in all states, there are clear rules for how assets are to be distributed if you die intestate. If there is a surviving spouse, the first $200,000 of the estate, after funeral bills and other obligations are taken care of, go to the spouse. Any remaining assets are split: 50% to the surviving spouse and 50% to children. If there are no children then that portion of the estate is doled out in a specific manner to other relatives. Click here for an explanation.

If there is no spouse then the entire estate is split among the children; and if there are no children then it is divided among other relatives as explained in the link above.

Without a will your spouse will not inherit your entire estate. You also cannot specify which assets you’d like to go to particular children or charities. You also can’t intentionally disinherit a family member unless you say so in your will. And finally – and very importantly – you can’t let family members know who you would like to take care of your children. That will be left up to the family and the court without any direction from you.

A will can always be changed, so there should be nothing stopping you from creating one today. Be sure to draft your will through a lawyer. Handmade wills or ones created from online templates may not contain language that is required for your state. There are also specific rules about how the will is signed and witnessed in order to be valid.