Why a Will is Important

People often wonder if they really need a will. This often occurs when people think of their estate as small or when they think joint ownership will solve the problem.

It is true that you can "avoid probate" by putting someone else's name on your bank account, investments, or home. The problem with doing this, however, is three-fold (at the least). First, you actually subject your assets to the creditors of the other person. While it may be possible to prove that you put someone else's name on your account as a form of estate planning, that might not be a convicting argument in court. Second, once you put someone else's name on your assets, you may have a hard time getting them back, especially with real estate. In fact, we have deal with cases where an adult child refuses to transfer property back to a parent, claiming he / she is "protecting" that parent against bad decisions. This can cause much friction in the family.

Finally, there are substantial tax ramifications if you transfer real estate into joint ownership with another person. If you had died and left the real estate to your heir through a will, then the heir could have avoided capital gains tax on the appreciation that occurred during your ownership. If, on the other hand, you quit claim that property to someone during your lifetime, that is considered a "gift" by the Internal Revenue Service, and the "donee" will be taxed on any capital gain. This could have been avoided by leaving the property to the heir in your will.

If you execute a will, you can also name the personal representative (or executor), along with a back-up personal representative if the first person is unwilling or unable to serve in that capacity. This eliminates conflict as to who will prove your estate and reduces legal fees that would have incurred in asking a court to name the representative.

Many states now have "statutory wills" which are available at the public library or through a state representative's office. These "forms" are valid and enforceable as a will if they are properly completed and witnessed. Best of all, they are free. If you want something different from the "form," you need to hire an attorney.

In short, there is nothing wrong with putting a loved one's name on a bank account so that the balance in the account will be "payable on death" (or "POD") to a party you have named, but you need to know that This strategy is no substitute for a will. Also, while you may have few assets now, there is a chance (unfortunately) that you might die as the result of a serious accident or medical malpractice, and your estate may increase considering if a claim is successfully asserted against the wrongdoer.

Source by Marian Faupel

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