Why do I need a Will?

With credit to Elizabeth Barrett Browning, let me count the ways (or reasons).  Take this case: 

Mrs. Life Insurance Producer is in her 50’s and has built a successful insurance business providing life insurance to affluent clients.  She also receives fees to manage her client’s 401(k) plans.  Her second husband, 20 years younger, gave up his military career to join her in the life insurance business.  Together they have continued to grow Mrs. Producer’s business, and despite some problems with Mrs. Producer’s grown children who resent their mother’s trophy husband, life is good.

Like the cobbler with no shoes, the Producers do not have Wills or Revocable Trusts, although they routinely advise their clients that estate planning is an essential component of each client’s financial security.  Besides, because they are married, they expect that all their assets will pass to each other upon the first death, other than an insurance policy where Mrs. Producer names her children as beneficiaries.  But tragically, Mrs. Producer dies in a diving accident in the Caymans.  In addition to the trauma of losing his wife, Mr. Producer then discovers that he will not receive his wife’s most valuable asset – the insurance business he helped grow. 

The Producers live in Virginia, and state law provides that upon death, without a Will, all assets that do not have a beneficiary designation or survivorship right pass only 1/3 to the surviving spouse and 2/3 to children.  Because the Company Stock was owned solely by Mrs. Producer and she had no Will, the children, not Mr. Producer, will receive 2/3 of the business and all other assets.  Of course, Mr. Producer also is worried about 45% estate taxes and exorbitant probate taxes and lawyer fees.      

What was the solution?  For starters, a simple Will could have left the business to Mr. Producer and divided other assets among him and the children.  Funding Revocable Trusts could have totally avoided probate costs, and tax planning could have eliminated $1 million of estate tax and likely avoided all estate tax at the first death.  Further, a marital trust could provide that the assets that passed to Mr. Producer were for his lifetime benefit, but ultimately passed to Mrs. Producer’s children upon Mr. Producer’s death, keeping them in Mrs. Producer’s bloodline. 

Although not all families would have the problems discussed above, suffice to say planning is necessary to preserve and protect assets for your family.