Chipman Mazzucco Emerson Estate Planning and Elder Law

1. “My spouse and I don’t need Wills because, if one of us dies, the surviving spouse will inherit everything automatically.”

While this may be true for property that is held jointly with rights of survivorship or property that passes by beneficiary designation (a/k/a non-probate property), this is not always the case for property that is held in the deceased spouse’s sole name (a/k/a probate property). 

If you are married and your spouse dies without a Will, you may not receive all of your spouse’s property.  In fact, your IN-LAWS could receive a portion of your spouse’s probate property (which is not what many people would intend).  For example, the following table illustrates what happens if your spouse dies without a Will in Connecticut, with probate property worth $1,000,000, based on the following circumstances:

Based on the table above, consider the following scenarios:

a. Your spouse dies and you have a two-year-old child.  Your two-year-old child will receive an inheritance of $450,000 and you will receive $550,000.

b.  Same example as above except the two-year-old child is your spouse’s child from a prior marriage.  The child will receive even more, $500,000, and you will receive $500,000.

c.  You and your spouse have no children, but one or both of your spouse’s parents survive your spouse.  No matter how you feel about your in-laws, they will receive $225,000 (a quarter of your spouse’s probate property).

In addition, if you and your spouse do not have Wills, you could lose out on some significant tax planning and asset protection planning opportunities.  For a detailed discussion about tax planning and asset protection planning see our previous articles (Special Needs Trusts, Making Use of Estate Tax Marital Deductions and Estate Tax Exemptions in 2010–To Be Updated).

2. “I don’t need a Will because I am not married and I have no children so everything will pass to my siblings, right?”

If you are single and you die without a Will in Connecticut with probate property worth $1,000,000, the following table illustrates how such property would be distributed based on the following circumstances:

As illustrated above, if you do not have children and die without a Will in Connecticut, your parents will receive your property, if your parents survive you.  For some people, leaving property to their parents is not a problem.  However, consider the following scenarios:

a.  Your parents are in a nursing home and rely on government benefits to cover the cost of their nursing home care.  Any inheritance that they receive from you will cause them to lose their government benefits.  They will have to spend the inheritance on their nursing home care and, if any assets are left when they pass away, the state may be entitled to the remainder.

b.  Your parents have large estates and they may have an estate tax problem when they die.  Any inheritance they receive from you could push their estates over the applicable estate tax exemption and could result in a potentially large estate tax when they die.

c.  Your parents are doing fine but your brother is struggling to make ends meet with three kids to support.  Without a Will, your brother will not receive any inheritance from you if your parents are still living.

If the last row of the table above applies to you and you die without a Will, your next of kin will inherit your property.  This could mean that distant cousins you have never heard of will share equally with cousins you have known all your life.  In addition, your Administrator will have the responsibility of locating your heirs and proving to the Probate Court that no other heirs exist.  Proving a negative can be a costly and time consuming endeavor.  Some Probate Courts will require your Administrator to hire an heir search firm (and pay the costs of such firm out of your estate).

3.  “I don’t need a Will because I don’t have any assets, so why waste the time and money?”

Appointing a Guardian

If you have minor children, the most important reason to have a Will, regardless of your net worth, is to name a Guardian who will take care of your children when you and the other biological parent have passed away.  If you do not have a Will that appoints a Guardian, the Court will appoint someone for you.  Most people do not want to leave this kind of decision up to the Court’s discretion.

Appointing an Executor

If you have no Will, the Probate Court will have to appoint an Administrator to settle your estate.  The Court will typically look for a family member to be the Administrator.  However, you will have no control over who that family member will be.  Your estranged untrustworthy cousin may be the only family member who lives nearby.   

Instead of letting the Court choose who has control over your assets when you pass away, you can name an Executor (and back-up Executors) in your Will.  Besides being able to control who will control your assets when you die, naming an Executor makes the estate settlement process quicker, easier, and less costly.

Posted on 11/5/2011 by Kasey S. Galner, Associate, Chipman, Mazzucco, Land & Pennarola, LLC.

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Notice: To comply with U.S. Treasury Department rules and regulations, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction, tax strategy or other activity.

This entry was posted on November 5, 2011 at 3:37 pm and is filed under Elder Law Planning for Incapacity and Long Term Care, Estate Tax and Estate Planning Developments. You can subscribe via RSS 2.0 feed to this post's comments.

Tags: estate planning, wills