When do I need to write out a last will?
When asking the question of when you should do anything, the first thing you need to ask yourself is what it is that you’re really doing, and then if that is going to materially improve any aspect of your life as a result of that action. So let’s look at the case of creating a last will and testament, commonly referred to as a will. A will spells out in clear language what you want to happen to things that you own when you die. In short, it tells a probate court which possessions you want going to different people. It doesn’t matter if we’re talking about investment accounts, houses, or baseball cards – you can specify how any of these things are distributed. It can also have some provisions for specific pieces of property, and may specify what happens to minor-age children as well. Other than that, wills don’t really do much.
So now that we know what a will does, let’s look at who this could affect positively. The first piece that a will has the power to impact is any assets you may own. So it’s probably a good rule of thumb that once you actually start owning a significant amount of assets, having a will can make the process for administering those assets after your death a lot easier and cheaper for whoever is left that is going to be inheriting your assets. What qualifies as a “significant amount of assets?” It’s probably not $500 that you have in a bank. And the line is different for everyone, but there’s an argument to be made that once you get into the tens of thousands of dollars of assets, a will should at the very least be a consideration, and once you accumulate north of $100,000 in assets, the urgency for a will should increase.
Now, there are a couple other considerations regarding wills as well. Certain investment accounts require you to name beneficiaries on them, while other investment accounts make this feature optional. If an account has specifically named beneficiaries listed, those beneficiaries supersede any will that is written elsewhere. So if you have $50,000, but the money is held in a Roth IRA with someone listed as a beneficiary, you don’t need a will for that asset, because you already have a beneficiary named. So really, we are talking about asset amounts for assets in which you cannot expressly name a beneficiary.
Another key factor to keep in mind is your marital status.
While most states typically dictate that in the absence of a will, most assets will go to your surviving spouse, this may cause problems in certain situations. First, you may want some assets to go to someone other than your spouse. It’s easy if it’s a hockey stick collection that your spouse doesn’t want. He or she will just give them to the person who you wanted those assets to go to. But what if you wanted to carve out some money from one account for your sister? What if you wanted your ownership stake in a property to go to a nephew? Those things don’t happen automatically if you are married, and so having a will in place helps to make sure that once you are married, things go where they’re supposed to go if you die.
Lastly, having children greatly increases your need for a will, even if you have a smaller amount of assets. A will can provide a path to naming an executor over your estate and a guardian for your children if you and your spouse pass away prior to your kids being 18 years old. So this has to be an immediate consideration once you have kids, simply because you want a predetermined path in place for them to follow if an unfortunate event strikes you and your spouse, rather than your families arguing and trying to work out a plan for who gets the kids.
So to summarize:
- If you don’t have any meaningful assets and are single and without kids, you probably don’t need a will, but it never hurts to have one.
- If you have any level of meaningful assets that you want to make sure wind up in the hands of a certain person or certain people, you should likely have a will, regardless of marital status or children.
- If you are married or have kids, a will should be a really, really high priority for you.
- If you are married and have kids, a will is an even higher priority for you.
For basic estates, you may be able to find a document online that satisfies your needs, but make sure you check with state regulations to make sure you have it signed with the required number of witnesses and notarization if required. More advanced estates require more advanced planning, and for those types of cases, attorneys are usually a good bet, though a costly one, simply because the cost of getting your planning wrong in those situations can be significant.