Where There's No Will There's a Way

The husband does not have a will and the deed to the family home is in his name only. He has children from a former marriage. Asked his current wife in a newspaper advice column, “What happens to the house if he passes away?”

An old proverb suggests “determination will overcome any obstacle.” English essayist William Hazlitt (1788-1830) reframed that idea insisting, “Where there’s a will there’s a way.” For the lady pondering what happens to the home owned by a deceased spouse, where there’s no will there is a way. It’s a state directed legal process, but it’s difficult, potentially expensive, time consuming, and frustrating, and the widow won’t be happy. 

Per LegalZoom.com, 62% of Americans don’t have a will. Of those that do, 12% created them recently during the pandemic scare. Estate planning done in haste rarely is optimal. Reasons for a lack of planning are legion. Some think they don’t own sufficient assets to make a difference. Some assume their property will automatically pass to a surviving spouse or partner. But as George and Ira Gershwin noted in the enduring song from their hit 1935 opera “Porgy and Bess,” “It ain’t necessarily so.”

If you don’t have a will, your state of residence has written one for you. The rules of distribution vary for those who die “intestate,” i.e., without a valid will. A probate court judge will oversee the process that determines who gets what. Most states are concerned with minor children and the assumption that a mother or father will get full control of the estate may be faulty.

More couples than ever are living together outside of marriage. A 2019 Pew Research study found that 59% of adults ages 18 to 44 have lived with an unmarried partner at some point in their lives. Thinking that a partner, married or otherwise, will simply take over one’s assets and property is misguided. If a minor child is involved, court proceedings are even more complicated. If there’s a special needs child in the family, specialized planning is critical!

Whether single, married, divorced, or cohabitating, as you journey through life you acquire more and more stuff, including bank and investment accounts, retirement plans, insurance policies, debt instruments, etc. If you don’t specifically say what happens to possessions at death, a probate court, usually in the county where you reside, steps in. Probate is a court-supervised process that gives someone authority to gather your assets, pay debts and taxes, and ultimately transfer property to those who will inherit it. The idea behind a will is for you to designate the person who will act in the above roles. But even with a will, probate may be necessary.

An estate planning attorney can show you how to minimize or avoid probate. However, not everything you own will be subject to probate. Certain types of joint ownership accounts can avoid probate as you have designated a named survivor who will inherit the property. Beneficiary designations naming a person as a primary or contingent beneficiary on insurance and annuity contracts and certain types of retirement accounts will allow assets to bypass probate. However, if you list “estate” as beneficiary, those assets are subject to probate. If a minor is a desired beneficiary, either primary or contingent, consider trust provisions.

As net worth grows, so does complexity. Your attorney may advise a revocable living trust (RLT) as a primary estate planning tool. In addition to avoiding probate, a trust is a private matter, whereas probate is a public matter. If you own property in another state, say a vacation home or investment holding, and the property is owned by your trust you can avoid probate in multiple jurisdictions.

It is not the purpose of this column to give legal advice as that is the purview of qualified attorneys. The intent is to raise awareness as to why timely and comprehensive planning is important. Procrastination is not an estate plan. Failure to plan is a decision of sorts but you will not leave family and potential heirs in great shape at a time of loss and stress.

A will only applies when you’re dead. What about disability, the potential loss of mental capacity to handle your affairs? Such concerns are not just the purview of senior citizens. The young don’t have immunity from disabling calamity. Only God knows the extent of our viability and lease on life. Powers of attorney for assets and health care and advance directives are integral to comprehensive planning. A review of all insurance policies, including life, disability, health, and basic and umbrella liability, is advised.

Major tax increases are being discussed in Washington and those blessed with higher earning power and net worth may wish to explore advanced gifting and trust planning strategies. Closely-held business owners whose business value is a major part of family security and retirement independence should pay close attention to potentially changing income and estate tax laws, along with updated succession planning and value acceleration strategies for the business.

We are mortal beings subject to the slings and arrows of life. There’s a vaccine to deal with Covid-19, but there’s no vaccine that bestows earthly immortality. Plan wisely.