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Estate Planning Basics: What Is a Will and Who Should Have One?

Attorney Cheri Dorsey continues our series on estate planning basics, discussing the importance of will and who should have one.

Transcript

Tim Maurer:

Tim Maurer back with another episode of Ask Buckingham, a new video podcast designed to bring clarity in the midst of confusion by connecting your great personal finance questions with straightforward answers from industry thought leaders.

Today’s question will be answered by Cheri Dorsey, an estates and trust attorney at the firm she co-founded, Sessa and Dorsey. And Cheri, of the three most important documents in estate planning, the foremost among them might be the proverbial last will and testament, but it’s not just proverbial. It’s a present reality, and very important. What exactly does a will do?

Cheri Dorsey:

The primary purpose of a will is to dispose of your probate assets. Any assets that you own in your individual name, where there is not a beneficiary designation on that asset, like an IRA or a life insurance policy, is going to be distributed pursuant to the terms of your will.

Otherwise, if you don’t have a will, there is a statute that’s going to provide how those assets are distributed. Most people would like to have a will so they can actually control the disposition of your assets.

In the will, you also can name the executor of your estate. That is the person who’s going to have the legal authority, once you’ve passed, to make sure that the terms of the will are carried out and all the assets get to where they really need to go.

Tim Maurer:

All right. Now, Cheri, you did start using a couple big, lawyerly words on us there. I think I heard disposition somewhere in there. But you started off with probate. What exactly is probate, and a probate estate?

Cheri Dorsey:

Sure. The probate process is the process by which assets are distributed from a decedent’s name. When a person passes away, if they have assets still in their name, the only way to pass those assets out of a decedent’s name is this probate process.

Generally, that means that a petition for probate is filed with the court, and the court then appoints a legal authority, a person who has the responsibility. In Maryland, we call that person the personal representative. In other States, they’re oftentimes called the executor.

That probate process is the process by which the executor transfers those assets out of a deceased person’s name, and gets those assets to the intended recipients.

Tim Maurer:

Got it. So the will is what gives the guidance to take assets from someone who was formerly living, is no longer. It goes into their estate, a bucket just holding all of their stuff, and the will gives the instructions on how those assets should get wherever they’re going to go. Is that the basic idea?

Cheri Dorsey:

That’s exactly right, Tim.

Tim Maurer:

Okay. So then, who should have a will and who doesn’t need one?

Cheri Dorsey:

Really, everyone should have a will. The will really, in addition to disposing of the assets, in a will you can also make your wishes known as far as burial or cremation is concerned. You can dispose of your tangible, personal property. Which, everybody generally has some personal belongings.

A lot of people say, “Well, I don’t have significant assets. I don’t need a will.” But every living person really has belongings and assets and things that they want to distribute. And so, really everyone should have a will.

Now, if you are married and your assets are titled jointly with your spouse, all your assets are titled jointly, your home, your cars, your bank accounts, et cetera, that will might not actually need to come into play for the disposition of the assets. But still, you may have tangible belongings that get distributed through your will. So really, I don’t think there’s anyone who shouldn’t have a will.

Tim Maurer:

Sure. Because even in that case of the married couple, what happens if, heaven forbid, they both leave this earth at the same time in an automobile accident, on a cruise ship, whatever it might be. Then something is going to need to direct their assets, once it goes beyond the spouse.

Cheri Dorsey:

Absolutely. Yep, that’s, that is correct. You always want to think about, yes, I might be married, but what happens when both of us are gone? That’s the reason why you both really need to have wills. Everyone should have one.

Tim Maurer:

Yeah, and I also thought about the most important time to have a will could be for someone who is simply a parent. They might not have an asset in the world, but if you’ve got minor children, how could that play into your will?

Cheri Dorsey:

Sure. So in your will, you have the ability to name the guardian of your minor children. Obviously, if you’re married and you predecease your spouse, it’s likely that the parent would be the proper person to be raising the children at that time.

But we hear the unfortunate situations of a husband and wife being killed in an auto accident or a plane, things of those sort. And if there are minor children, it really becomes a difficult process for the children and the remaining family members to try to determine who should raise the children.

In a will, if you have minor children, you can name the guardian, and that really relieves the living family, the children, and other relatives, of all of that difficult decision making and burden after you’ve passed.

Tim Maurer:

For sure. What are some of the key decisions that an individual or couples should consider prior to having a well written?

Cheri Dorsey:

Well, they definitely need to think about who would be the executor of the estate, who would be the guardian for the minor children. Are there any specific bequests of items or cash that they want to dispose of, or go support a charity, things along those lines.

And then, as far as distributing assets to underage children, we get into deeper discussions such as, should there be a trust for the children? If there’s a trust for the children, who should be the trustees?

What sometimes starts as a very sort of, seems to be a simple conversation, can get quite complex rather quickly.

Tim Maurer:

It sure can. Quite complex, and also quite emotional as well. Do you find that when you’re dealing with folks in these questions?

Cheri Dorsey:

Absolutely. In fact, I think a lot of times parents don’t do their wills because husband and wife can’t agree on who should raise the children. I mean, typically that’s one of the toughest questions.

Wife may have her family, husband may have his family, and it’s very difficult to think about who should be given that responsibility of their children. So as a result, sometimes people just punt, right? Isn’t that natural? Human nature is just to avoid. But unfortunately in this situation, avoiding those decisions ultimately could really harm the family and the children.

Tim Maurer:

Indeed it could. Well, I find it hard to believe that any married couples would have disagreements over anything, but I guess if, I guess it does happen.

Cheri Dorsey:

That’s from time to time. I understand.

Tim Maurer:

Well, thank you, Cheri. And thank you for tuning into this episode of Ask Buckingham. If you have a question that you’d like to see us address, you can do so by navigating to the website, askbuckingham.com or by emailing your question to question@askbuckingham.com or just click in the upper corner of the screen, it’ll take you directly to the website. Remember that there are no dumb questions, but unfortunately there are plenty of poor answers out there.

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