Rothman Gordon: Back to Basics Estate Planning: Why A Will

Back to Basics Estate Planning: Why A Will - Part II

In Part I of our "Back to Basics" series, my colleague, Doug DeNardo, provided a general outline of some of the problems associated with not having a Will (dying "Intestate") and then discussed the terms Probate Assets and Non-Probate Assets. I will discuss what happens to your Probate Assets if you do not have a Will and also what happens to jointly owned property if both husband and wife die in a common disaster and if you do not name a beneficiary of retirement assets or a life insurance policy.

When spouses own property jointly and they die together as a result of a common accident, one-half of the jointly owned assets would pass through each spouse's estate - to the beneficiaries named in the Will. Similarly, if you fail to name a beneficiary of a retirement plan or life insurance policy, under normal circumstances, the benefit would pass to your estate to be distributed to the heirs named in your Will. Finally remember that all Probate Assets will pass in accordance with the terms of your Will.

The problem then arises if you do not have a Will. Again, this is called dying Intestate and the beneficiaries of your estate become those individuals named by your State's laws. This is generally called intestate succession. The Commonwealth of Pennsylvania provides a schedule for determining intestate succession. If you are aware of this schedule, you may be satisfied that the legislature has adequately provided a plan for you. A word to the wise, however - generally the intestate descent schedule is not what you want, so everyone should have a Will to ensure that the beneficiaries of your estate are who you want.

A common example of intestate succession in Pennsylvania is the case where you are married and have children who survive you (all of whom are children of the surviving spouse). In this instance, your spouse would receive the first $30,000 of your estate and one-half of the balance. Your children would receive the remaining one-half of the estate.

Most individuals have two problems with the distribution provided for by the intestate succession statutes. First, the spouse is sometimes not adequately provided for since children will receive one-half of the estate. Second, if you have minor children, the minors' shares will be held in a court supervised guardianship account that provides little room for good investment management and distributions without court intervention.

Based upon the foregoing, the existence of the intestate schedule of distribution is the single greatest reason to have a Will - the individuals that you want to receive your estate should be the beneficiaries - not the individuals named by some statute you have never read.

In "Why A Will - Part III", we will continue to explore some of the other problems associated with not having a Will.

Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm's attorneys.

We are required by Treasury Regulations to advise that this writing is not intended as a reliance opinion and cannot be used for purposes of avoiding IRS penalties.