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Despite advances
in medical technology, the mortality rate for humans remains stubbornly fixed
at 100 percent. So why is it that about millions of Americans still die without
a valid will? Everyone needs a will. The primary purpose
of a will is to ensure that your assets are distributed to whomever you choose
in the amount and manner that you choose. Other functions include assigning guardianship
to minors and appointing an executor to dole out your stuff.
Suppose you die
in a car wreck caused by a drunk driver. Even if you have no assets, your estate
might have a wrongful death suit that produces millions, all of which will be
divvied up by the state if there's no will. Dying intestate also
triggers a little-known hassle in the form of an administrative bond. When someone
dies without appointing an executor, the court appoints an administrator to disburse
all property that wasn't jointly owned with a survivor. The administrator must
post a bond to ensure that he doesn't loot the estate and vanish. The cost of
that bond, usually about $100 a year for every $100,000 in the estate, is paid
by the estate's assets. In general, a will must be signed in
the presence of two witnesses to be legal (as do "codicils," or subsequent changes).
Handwritten wills, known as "holographs," are legal in about half the states.
But a higher quality will isn't that
pricey. An attorney will usually do a bare-bones
"simple will" for less than $100. A simple
will means no trusts and an estate value under $2
million, which is a magic number because it's now
where federal estate taxes, at a rate of 46 percent,
kick in. Tax law changes in 2001 mean the amount
of an estate that's exempt from taxes will gradually
increase and the tax rate applied to the remaining
amount will drop until the estate tax is eliminated
in 2010. In 2011, the estate tax exemption will
go back to $1 million and the tax rate on the remainder
will go to 55 percent unless Congress takes further
action. That's why estate planning remains critical.
And while your talking with your attorney, it's
a smart idea to discuss related issues -- power
of attorney in the event you are disabled but not
dead, a living will to deal with heroic medical
efforts. All this can be incorporated for about
$200 to $300 total, assuming again that your estate
is relatively modest and depending on where you
live.
Those
with substantial estates (at least $250,000 or so) might consider establishing
a living trust. A trust is simply an agreement between the grantor (the person
who establishes and funds it) and the trustee, who administers it. When someone
with a living trust dies, he can leave all his assets to the trust, which can
then be doled out by the trustee. This escapes the attorney's fees for handling
the probate process (probate simply means "presenting the will" to the court,
and the fee is usually about 2 percent to 3 percent of the estate). Living wills
also get the assets into the heirs' hands quicker (60 to 90 days vs. 9 months
or so for probate). Caution: A living will is never a substitute for a will. An
attorney will set up a living trust for $500 to $1,000, and there's a yearly maintenance
fee charged by the institution that houses it. Mark C. White,
an attorney in Cleveland who specializes in estate law, emphasizes the importance
of a living will in today's medical climate. "In the past, people tended to just
die. Now, people live for years, but are unable to make competent decisions. Lawyers
make money off these people. I've had guardianships where I've made money for
years that the relatives wouldn't have to pay had they established each other
as nominated power of attorney. Because the judge has to approve every little
thing -- a stock sale or if the house needs to be sold." White
says that anyone who may end up in charge of their parents' assets should they
become disabled should seek a power of attorney provision. "Power of attorney
isn't foolproof, but it can save a pile and is almost as important as a will. If
you choose to prepare your own, make use of several good do-it-yourself will-maker
kits, both in print and electronic versions, the best of which are sold by legal
publisher NOLO. Not surprisingly, estate lawyers tend to recommend professional
legal help, and their case isn't without merit. White points out that the kits
only help with those questions the filer knows to ask. Stuff like durable power-of-attorney
is critical in today's era of people living for decades without the faculties
to make financial decisions for themselves. And every estate lawyer in the land
has horror stories of survivors who suddenly found themselves in estate-bleeding
battles with long-lost relatives. So use the kits if you like, but don't automatically
think that certain facets don't apply to you.
One last common error: Use a separate
document for special burial instructions. Estate
attorneys all have clients who buried their parents
only to open the will a few days later and discover
a desire to be cremated.
Ken
Kurson has written for Forbes, Worth, Esquire, The New York Times and elsewhere.
Kay Bell contributed to this story.
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