Image source: Flickr user Ken Mayer.
Continue Reading Below
Many people never think about writing a last will and testament, but your will can be the most important legal document you leave behind after your death. The recent prominent case of music legend Prince and his apparent failure to draft a will is only the latest reminder of why many people should absolutely get their estate planning done. Below, we'll take a look at the factors that you should consider in deciding whether you need a will.
A will won't cover all of your assets
Even if you have a will, some of your assets will pass to heirs according to different rules. For many types of assets, including IRA and 401(k) retirement accounts, life insurance policies, and annuities, have you list beneficiaries who you want to receive the proceeds after your death. Even if your will says something completely different, whoever you name in the beneficiary designation will receive those particular assets.
In addition, if you hold property as joint tenants with rights of survivorship, then the property will pass automatically to the surviving joint tenant after your death. However, some other forms of joint ownership, such as tenants in common, don't have this automatic provision, and the deceased owner's portion of the property will pass under a will or intestacy laws. Some people find that by using beneficiary designations for all of their major assets, their need for a will is greatly reduced.
Where your assets will go without a will
Continue Reading Below
Perhaps the most important thing to know if you don't want to create a will is what will happen to your assets if you have no will at your death. Every state has its own special intestacy laws that automatically create rules for passing your assets to your heirs at your death, and for some people in simple family situations, those laws might be adequate. However, intestacy laws don't always provide for the rules that you would pick if you chose to take action yourself. The safest course is always to create a will and specify directly what you want done with your property.
Consider a trust instead
Wills are great for moving assets, but they aren't good for privacy. They have to go through the probate process, at which point your estate planning documents will become public. That can prove to be embarrassing to surviving family members in many situations and can cause unnecessary tension.
By contrast, if you use a revocable trust as your primary estate planning document, then you can avoid probate court entirely. Even if there are assets left outside the trust's legal name at your death, a simple pour-over will can ensure that everything ends up where you want it to -- and with a minimum of fuss.
Have kids? A will can be crucial
One thing that you can do in a will that you can't do in most other legal documents is to name a potential guardian for your minor children. Absent a provision in your will, a court will be required to do an in-depth inquiry in order to find a guardian who is in the best interest of the child. Even after best efforts, not all judges come to the same conclusions that you would in their place.
Even if you name a guardian in your will, the court isn't required to honor your selection. However, more often than not, probate courts give great weight to the named guardian in a will. Those who have kids can't afford not to have a will if only to cover that contingency.
Having a will is important, and for many people, it can handle things that no other document can. Make sure you look through these provisions carefully, and if you're in any doubt, drafting a will is always a smart move.
The article Should You Have a Will? originally appeared on Fool.com.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.