Estate Planning - Do We Really Need a Last Will and Testament?

Summertime is upon us and many families will be traveling together.  Unfortunately, automobile accidents account for a high proportion of the deaths of younger people or people under 50 or parents of young children.  It is correct that if one spouse dies, the house that is jointly owned will automatically be owned by the surviving spouse.  When both spouses die, however, without a will, the property would be inherited by the children when they turn age 18.  If the house is worth a few hundred thousand dollars and there are other assets such as 401(k) plans and any potential wrongful death lawsuit recovery funds, if the decedents had no will, the funds would be held by a guardian until the children turn 18 and then money would be turned over to them at age 18.  How many 18-year olds should inherit several hundred thousands of dollars on their 18th birthday? 

Through a simple will, the parents could have made a provision indicating that in the event that the children are younger than age 25, for example, then the funds would be held by a sibling, friend, etc., as trustee for the children until they reach a certain age.  We find that most of our clients prefer such a distribution plan rather than provide for a significant distribution when their children turn 18. 

Parents have several distribution plans available to them.  They can simply appoint a trustee to manage the estate’s assets until the children reach the designated age.  If the parents have not established a trust of any kind to provide for the stewardship of assets, then the guardian over minor children will have complete control over the management of property, although he must always act in the best interests of the beneficiary.

Most states have enacted UTMA (Uniform Transfer to Minors Act) laws permitting the appointment of a temporary custodian over assets that underage children will inherit.  Arranging for inheritance under UTMA, however, means that the children will accede to the property at the age specified under the statute, which is often only 18 or 21.  If you don’t trust your children to exercise responsible stewardship over your property at such a tender age, then you will want to avoid distributing your assets under this statute.

Some parents choose to set up a trust for each child with more specific instructions on the settlement of assets.  In their will, parents designate a trustee to manage the property until the child reaches a certain age or meets certain conditions (like graduating from college).  Trustees have more responsibilities than custodians under UTMA.  For example, they must file annual income tax returns.  If you have substantial assets, then establishing a trust might be a good idea for you, because it sometimes enables you to offset or avoid steep inheritance and gift taxes.  The current threshold for the introduction of estate taxes is 5 million dollars.  If your estate’s assets amount to more than this sum, you might be able to forego paying the taxes (or prevent the estate from having to pay the taxes after your death) by splitting up the estate into various trusts consisting of sums below the 5 million dollar minimum.  You should talk with an estate planning attorney on ways to distribute your assets responsibly and at less cost to your heirs.  You have worked hard to build up your fortune, so take the necessary and simple steps to make sure that it is managed according to your wishes.

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.