“Do I need a will?” If you’re asking yourself that question, the answer is probably “yes.” But there are some situations in which having a will is more critical than others.
The situation in which it is probably most important for you to have a will is if you have someone depending on you for their day-to-day care. Whether it is a child under the age of 18, a special-needs child who will need financial support into adulthood, or an elderly parent, you owe it to those people to have a plan in place, in case something happens to you. That plan needs to specify both where money that you currently provide would come from if you weren’t around and also how and when it should be doled out.
The second situation in which you need a will is if you have significant assets. What counts as “significant?” A lot of people peg this to the amount at which the federal estate tax kicks in. Certainly, if you have enough assets that the estate tax is an issue for you, you need to have a will (and probably several other documents). But thanks to some significant raises in the exclusion amount, almost no one has that much money anymore. As I write this, the exclusion amount is more than $5.3 million per person.
Taxes, however, should not be your only consideration. Another factor that motivates many people to do estate planning is the probate process. If you have more than about $60,000 in assets when you pass away, or if you own real estate in your name alone, your heirs are going to have to go through the probate process to get your assets transferred into their names. There is a much higher likelihood that that process will go smoothly if you have left instructions about who should get what.
The third situation in which you almost definitely need a will is when your income comes primarily through a business that you own. In fact, your will should probably be part of a more comprehensive plan, specifying what happens not only to your personal assets, but your business assets as well, if you pass away or become incapacitated.
A lot of people assume that if they have a trust, they don’t need a will. It’s true that one of the biggest benefits of having your assets held in trust is that they can be transferred without needing to go through probate. You probably should still have a will though, even if you have a trust, just in case you fail to get a significant asset transferred into the name of the trust. This happens quite often.
Even if none of these situations applies to you, having a will is almost never a bad idea — as long as it is properly drafted. An improperly drafted will can cause more problems than it avoids (see my recent article at Macaroni Kid about how bad things can get when they aren’t done right). But if any of the situations above do apply to you, getting a will put in place should be a high priority.