297- Why You Need a Will
As a result of the pandemic, people are awakening to the need to protect their household against untimely and premature death. Life insurance sales have increased dramatically. At the same time, I wish I could say the same about having a will in place. In this post, we will give background on who has a will and the major reasons why you should have one in place.
What is a Will?
A last will and testament is a legal document that lets you decide what happens with your estate after you die. This includes your financial assets as well as other key matters such as who will raise your children, who will look after a dependent relative, who takes your pets and what happens to your personal property. If you die without a will, a local court and your state’s laws govern what happens to your estate.
Who Has a Will?
In May 2021, the Gallup polling organization took a survey asking people about having a will. They asked people the following survey question, "Do you have a will that describes how you would like your money and estate to be handled after your death?" Very direct and very simple. Here is what they learned:
Percentage of Americans Having a Will, by Subgroup
Yes, overall only 46% of Americans have a will. As you can see above, the older people get the more likely they are to have a will in place. I think this survey uncovers a major exposure for most households. Without a will, key aspects of your finances, care for your dependents and other key matters are left unaddressed. These loose ends can cause significant stress and anxiety for your loved ones at time when they will likely have difficulty dealing with a family loss.
Reasons to Have a Will
The website freewill.com, which offers simple, online self-help tools to create a will,
lists the top ten most important reasons to have a will. Here they are:
1. Save time, money, and stress for your loved ones. Almost all estates have to go to probate court to start the legal process overseeing the distribution of assets. But when you don’t have a will, the court process — known as intestate administration — can get especially complicated. Without a will, the court has to name an administrator to administer your estate. And this can be time-consuming, expensive, and even contentious for your loved ones.
One of the top reasons to have a will is to streamline this court process. When you have a will, you can choose the person you want to handle your estate, making it easier for your loved ones.
2. Determine who will manage your estate. As mentioned above, deciding who will handle your estate is a great reason to have a will. When you write a will, you become a “testator” and have the opportunity to nominate an “executor.” This is the person who will be in charge of wrapping up all your affairs.
Being an executor is an important job. Their responsibilities may include everything from closing bank accounts to liquidating assets. So you should choose someone who is capable and who you trust to carry out these activities. If you don’t choose an executor in your will, the court will pick one for you — and it may not be the person you’d want.
3. Decide who gets your assets and property — and who does not. Most people know that a will lets them decide who will get their property. As the testator, you can name people as beneficiaries for specific assets. You can also name beneficiaries for any property that you don’t list — the “residuary” of your estate. When your executor handles your will, they’ll be in charge of distributing these assets.
You might not be aware that you can also use a will to help ensure that some people don’t receive anything. For example, you might want to prevent an ex-spouse from receiving an inheritance. Or, if one child received your support through school, you might want to make sure a second child gets their fair share, too.
4. Choose who will take care of your minor children. If you’re a parent, you can use your will to nominate a guardian for your minor children. The surviving parent will usually get sole legal custody if one parent dies. But if both parents pass, this is one of the most important reasons to have a will.
A guardian will be responsible for all your children’s daily needs, including food, housing, health care, education, and clothing. And if you don’t nominate a guardian in your will, a court will have to choose one for you. This could mean that someone you would not have chosen will be raising your kids.
5. Provide a home for your pets. Owning a pet is a great reason to have a will. With a will, you can make sure that someone takes care of your pet after you die. The law considers pets to be property, so you can’t leave any assets to your pet with your will. But you can name a beneficiary for your pet, leaving them to a trusted friend or family member. You can ask that person to act as a caretaker or guardian for your pet, and even leave them funds to provide for your pet’s care.
6. Leave instructions for your digital assets. Your digital assets may include online accounts, such as Facebook or email, and digital files or property (photos, videos, domain names, etc.). In your will, you can name a digital executor to manage these assets after you pass. You can leave them to specific people, and also include information on how you want them handled (e.g. if you’d like an account closed).
7. Lower the potential for family disputes. If you have complicated family dynamics, there’s a good reason to have a will. When you die without a will, your family will have to guess at what your final wishes were. And chances are, they won’t always agree. This ambiguity can create friction, and even fights, which sometimes lasts a lifetime. Creating a will solves the problem by eliminating the guesswork.
8. Support your favorite causes and leave a legacy. Many people want to leave a positive impact on the world after they pass. And a great way to do this is to support the charities or causes you love most. When you write a will, you can preserve your legacy by leaving a part of your estate to a charitable organization.
9. Provide funeral instructions. You may not want to think about your own funeral. But if you do think about it now, and leave instructions with your will, you can lessen the burden on your loved ones after you pass. While these instructions aren’t legally binding, they can give your executors and loved ones some guidance on your wishes.
When you include instructions, you can name a funeral executor to manage the process, give suggestions for the service and location, make requests for your final resting place, and more.
10. It’s easy to make a will and gain peace of mind. Some folks put off creating or updating their will because they assume their loved ones will automatically get an inheritance. But this isn’t always true. Probate can be a long and expensive process for your heirs. Plus, a will only addresses your current circumstances. You should update it over time as your needs and the people in your life change.
When you create or update your will, you can look after your loved ones and give them an easy map to follow after you pass. This gives many people peace of mind, making it one of the most important reasons to have a will.
Having a will created and updating it periodically is one of the must-do actions of personal finance. You take the time to budget your cash, have the right amount of insurance coverages in place and save for your future. You need to put a will in place just in case the unexpected happens. If we have learned anything the past few years, it is that the unexpected does happen in our lives.
Harry discusses this topic and much more on The FinancialVerse, available wherever you get your podcasts. Learn how to improve the quality of your financial life, reduce sources of money stress, and make the most of each stage of your financial journey.