First of all, let’s answer that second question with a resounding yes. Everyone needs a will. Even if you have no assets at all, you need a will. Consider what might happen should you die intestate (without a will) in a catastrophic accident that results in a lawsuit. If that lawsuit results in a large sum of money (millions?), the state would distribute that money for you, and your heirs may not get the full amount they otherwise would have.
The main purpose of a will is to direct the distribution of your assets exactly as you choose to do so, as well as to assign guardianship of your minor children, and to appoint a person to dispense your instructions (the executor). If you die intestate, the state distributes your assets according to a set formula, usually resulting in the surviving spouse getting half of the estate and the surviving children getting the other half. But this can also result in unintended, adverse consequences such as the need to sell a family home or other assets. Furthermore, if your children are minors, the court would appoint a representative to manage their interests until they are of age – at a cost to the estate, of course.
In the absence of a will, the costs to your estate can really add up. In addition to the normal probate costs, you can tack on appraisal fees and bond fees – the court appoints an administrator to oversee disbursement of assets, and that administrator must post a bond to ensure that he doesn’t just run off with the money. The estate pays the cost of that bond, which is usually around $100 for every $100,000 in the estate, per year – and without a will, probate could drag on. Worse, without specific instructions from you, disagreements among family members can escalate into full-fledged battles over what can sometimes seem to outsiders to be small points of contention.
Fear not, a simple will can often be set up for as little as $100 for clients with uncomplicated or smaller estates. However, the larger your estate, the more important that will becomes and if your estate is substantial, say, more than $250,000 or so, you may also want to consider setting up a trust in order to minimize probate fees and tax liabilities. The estate tax exemption for 2015 has been raised to $5.43 million (up from $5.34 million in 2014), which means anything in your estate over that amount will be taxed at 40%.
Everyone needs to have a will, but as you can see, the larger your estate, the more important it is to seek out professional guidance. Contact us for advice on the best tax strategies for your estate.