One of the last things many people want to focus on is preparing a Will or otherwise formulating an estate plan. There are all kinds of excuses a person can make for avoiding this seemingly unpleasant task. In this article, we will examine some common (mis)perceptions and questions many people have about the need for a Will and what actually happens when one dies without a Will.

1. "I own all of my property jointly with my husband or wife, so everything I own will pass to him or her even if I don't prepare a Will." Assuming the couple does own all of their property jointly, this is correct -- the surviving spouse will receive all of the first spouse's property. But what happens upon the surviving spouse's death? Or what happens if both spouses die together (for example, in a plane crash)? If you die without a Will (this is known as dying "intestate"), your assets that are not held jointly will be distributed in accordance with the laws of the jurisdiction in which you are domiciled. The people who receive your property in this situation may, or may not, be the people you want to receive the property.

2. "If I don't have a Will, the property that I own in my own name will pass to my spouse." This is generally not true. Under the law of many jurisdictions, if you die without a Will, one-third to one-half of your separately held property will be distributed to your children, not to the surviving spouse. The spouse will receive the remaining property. This obviously is not what most people have in mind. (Also note that if the couple owns property as "tenants-in-common," rather than as "tenants by the entirety" or "joint tenants with right of survivorship," then the property will not pass to the surviving spouse, instead it will pass under the spouse's Will, or in accordance with the laws of intestacy, if there is no Will.)

3. Do you want to take advantage of tax savings possibilities available through proper estate planning, or would you rather pay as much estate taxes as possible? The estate tax rates are very high. Under current estate tax law, you can pass $650,000 to your children without the imposition of an estate tax. (This $650,000 exemption amount will continue to increase incrementally until it reaches $1 million in 2006.) Note that life insurance and pension proceeds are included in computing the value of your estate, so that the size of your estate may be greater than you realize. The tax rate for assets in excess of $650,000 starts at 37% and moves progressively up to 55%.

There are estate planning options that allow you to shelter additional amounts from the estate tax. (For example, if the first spouse-to-die creates a certain type of Trust for the surviving spouse's benefit, then the couple can save up to $357,500 in estate taxes.) Also, if one spouse is not a U.S. citizen, then proper planning is needed to ensure that the estate tax is deferred until the surviving spouse's death. Although a discussion of these options are beyond the scope of this article, suffice it to say that the estate tax savings are available only if you have a Will (or Trust) with proper tax planning provisions.

4. If you have minor children, do you want to name the guardians for your children or do you want the court to appoint one? If you do not name a guardian in your Will, then the court will appoint one for your minor children. Again, the court appointed guardian may, or may not, be the person you want to raise your children.

5. If you have children, do you want to create a Trust(s) for them, or do you want the court decide how and when they will receive these funds? If you do not have a Will, then your assets passing to an adult child will be distributed outright to the child. Do you want your 21-year old child to receive a substantial amount outright? Also, property passing to a minor child will be held in accounts for the minor, to be administered under court jurisdiction. The minor's guardian must obtain court approval in determining how to invest and distribute the funds. Then, in most jurisdictions, the child will receive the entire Trust property at age 18 or 21. Again, do you want a child to receive a substantial sum at this young age?

In contrast, the terms of a Trust you could create under your Will can be far more flexible and tailored to any specific individual situation. The Trustee of the Trust has far more flexibility than the guardian in making investments and distributions. In addition, distributions to the child can be delayed until the child is older and better able to handle money (for example, age 30). The distribution can even be made in installments (for example, the child could receive one-third of his Trust share at age 25, another third at age 30 and the rest at 35). This can help ensure that the child does not waste his entire inheritance at one time. In more extreme cases (such as a disabled child or a "spendthrift" child), the property can be retained in trust for the child's lifetime.

Other issues arise in this respect. For example, do you want your children to share equally in your estate? Do you want to set aside more funds for a handicapped child's care? If you have given substantial sums to one child during your lifetime, do you want to include a "make-up" provision for your other children? You cannot provide for these special situations without a Will.

6. Do you want to name your Personal Representative or do you want the court to name the Personal Representative for you? If you die without a Will, the court will decide who serves as your Personal Representative. The Personal Representative, also known as an Executor, is in charge of marshalling your assets, ensuring that assets are distributed in accordance with the terms of your Will, filing the proper returns with local and federal authorities, and handling all of the other estate administration duties. Many jurisdictions have designated by statute who has priority to be named as the Personal Representative. Again, the court appointed Personal Representative may, or may not, be the person you want to serve in this capacity.

These are just some of the questions that can be answered with proper estate planning. Many other issues arise. (Do you want to be buried or cremated? Do you want to leave a gift or bequest to a special friend or relative?) As should be apparent, the advantages of preparing a Will far outweigh the reasons for avoiding the estate planning process.

Jeffrey Kolender, Esq.
Paley, Rothman, Goldstein, Rosenberg & Cooper, Chartered
Bethesda, MD 20814
www.paleyrothman.com