By: Matthew Getty
A common threshold question in estate planning is “Do I need to do anything?” The answer to that question depends a great deal on your personal preferences and whether you will be satisfied with the default results.
The disposition of your assets will depend on the form of ownership and Vermont law. If you are married, you may own many of your assets jointly in a way that allows your surviving spouse to automatically inherit the asset. You may also have various assets that are governed by beneficiary designations, such as life insurance and retirement accounts. You should check your beneficiary designations to make sure they have been completed and that they reflect your current wishes.
Any asset you own that is not held in joint ownership with right of survivorship or that does not have a beneficiary designation is likely to be owned in your own name and subject to probate court jurisdiction. Vermont law provides the default rules that apply to those assets in the event that you do not have a will. If you are married and have all of your children in common with your surviving spouse, then your surviving spouse will inherit everything. If you do not have a surviving spouse but do have children, then your children will inherit. If you do not have either a spouse or children, priority goes next to parents, then siblings, and nieces and nephews if a sibling does not survive you.
If you are satisfied with the above default rules and the titling of your assets then it’s possible that you will not care whether you have a will. In some circumstances you may still wish to have one. Here are some circumstances that frequently cause people to want a will (or cause their heirs to regret that they didn’t have one):
- You have a blended family. If you have remarried and have children from a prior marriage, you may not be satisfied with the default rules of Vermont law. In this scenario your surviving spouse would only inherit one-half of your probate estate and your children would inherit the remaining half. Your expectations could be defeated in a couple of different ways here. On one hand, you may have wanted your spouse to inherit all of your assets, but he/she will not. On the other hand, you may have wished to have your own children inherit all of your assets, but half will go to your surviving spouse, who can them leave them to whomever he/she wishes. You should be aware that a surviving spouse is entitled to half of the probate estate, even if you have a will. A revocable trust might be used to modify this result, which I will discuss in another post.
- You are in a relationship but not married. If you are in a relationship with someone to whom you are not married, the law does not provide your partner with any inheritance. You need to have a will if you want to leave any assets to your partner that are not held jointly with right of survivorship. You should also consider executing a power of attorney or advance medical directive if you wish to have your partner act as your agent in the event of your incapacity. If you acquire any assets with your partner you may also wish to have an agreement on how those assets will be divided if the relationship ends.
- You have minor children. If you have minor children, you might want to use a will to nominate a guardian or guardians to govern their custody and finances. This may also be an appropriate situation for a revocable trust if you do not wish to have your children inherit all of your assets at age 18.
- You wish to name an executor. You may also use your will to nominate someone to be in charge of administering your estate. If you do not name someone, your surviving spouse has priority to serve or nominate someone else.
- You wish to include other beneficiaries. Clearly, if you wish to leave a portion of your estate to individuals or charities other than those named in Vermont’s default rules then you will need to make other plans.
In addition, I should note that there is some risk to relying too heavily on joint ownership with children as a substitute to a will in order to pass on your assets. If your child divorces or is the subject of a lawsuit or creditor claim, your assets will likely be subject to those claims to the extent of your child’s interest in the asset. Needless to say, this can be a very unpleasant event when it happens. Your child also has the right to withdraw funds from a jointly owned account, which for some people is too tempting, particularly once a parent has reduced mental capacity. Finally, if you have more than one child but choose to name one child as a joint owner on an account for convenience purposes, you should consider the fact that that child will become the legal owner upon your death and the distribution of your assets will be unequal. We seldom advise clients to add a child’s name to a bank or investment account as a will substitute, although there may be reasons to do so under limited circumstances.
A will may not be adequate to address some of the situations listed above or others, such as in the case of a beneficiary with special needs. In some cases a revocable trust or other planning will be appropriate. Another word of caution is in order here: If you do execute a will or a trust, make sure that your affairs are ordered in a way that conforms with your plan. Remember that your will only governs those assets that you own in your own name at the time of your death. If you execute a will leaving a long list of bequests but the majority of your assets are held in a 401(k) with a different beneficiary designation, then your plan may not work the way you intended.
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