Why You Should Have a Will, Even if You’re Not Rich
- Everyone needs a will, even if they don't have much.
- Your will can impact what people do if you're unable to communicate in a medical situation.
- Wills can prevent misunderstanding and strife among your loved ones.
Tony Hsieh, the former Zappos CEO, recently passed away from injuries sustained in a house fire. At the young age of 46, he left behind an estate worth approximately $840 million. Since Hsieh did not have a will, it’s been a challenge to establish how to distribute his assets.
Hsieh’s story sheds light on the importance of having a will, no matter what your situation may be. Contrary to popular belief, this legal document is an essential part of your financial plan, even if you’re not rich or famous. Keep reading to find out the answer to the question “do I need a will?”
Wills and other types of estate planning tools
Estate planning* refers to what legal tools you use to decide whom you’d like to receive your assets after you die. It’s a good idea to familiarize yourself with the various types of estate plans which include:
Wills: A will ensures your assets are passed to the people you want to have them after you die. It includes a personal representative (an “executor”), who is the individual or institution that will oversee the distribution of your assets. A will needs to go through probate to be executed and become a final public record.
Trusts: A trust is an instrument that allows a third party, a trustee, to hold assets from the “grantor” (giver) for the benefit of other parties, called “beneficiaries”. A trust is similar to a will in some ways, but avoids probate and may minimize estate taxes.
Living wills: A living will is a written document which specifies what kind of medical care you wish to receive (often focused on life-prolonging treatment) if you are in a life-threatening situation and can’t communicate your wishes.
Healthcare power of attorney: A healthcare power of attorney allows you to choose someone to make healthcare decisions on your behalf if you’re unable to do so on your own.
Living trusts: Like other types of trusts, a living trust allows you to direct how you’d like your assets to be distributed after you die. With a living trust, however, you transfer your property and assets to the trust while you’re alive. This way, they can pass directly to your beneficiaries upon your death without the probate process. Living trusts can be revocable, or irrevocable.
Do I need a will?
Even if you consider yourself an “average Joe” without millions of dollars in the bank, a will is usually a necessity. This is particularly true in today’s COVID-19 era where even younger, healthier people are facing greater health risks every day. You should have a will to prevent situations like:
Family disagreements: Without a will, your family members won’t know how to distribute your assets. This can lead to confusion and even disputes over your property.
Court control: The court will make decisions on your behalf, unless you have a will. They’ll do this through probate, which is often a long and stressful process.
Unfair/incomplete asset distribution: If you have a family business, land, family heirlooms, a retirement account, or anything else of value but no estate plan, it may not be distributed the way you want it to be. The court will have to divide assets according to state laws, called intestate succession.
How to set up a will
Many people forgo a will because they believe the process of creating one is expensive and time-consuming. Fortunately, this often isn’t the case. If you’d like to set up a will, consider the following options.
DIY: If your situation is somewhat simple, you can prepare a will via software like Quicken WillMaker Plus, Fabric, or Free Will. It will run you about $50, or possibly less.
Professional: In the event your situation is more complex, or you don’t feel comfortable using a software program, consult an estate attorney, financial planner, or Certified Public Accountant (CPA).
No matter which route you choose, you’ll need a list of the names, addresses, and birth dates of your spouse, children, guardians, and other beneficiaries or necessary parties, like your chosen executor. Then, you’ll have to compile detailed information about your assets, which may include:
Life insurance policies
If you take the time to collect everything you need to draft your will beforehand, you’ll find the process to be much faster and easier. As your life changes, with marriages, divorces, births, or deaths, revisit your will to make sure it still reflects your wishes. Also, be sure to make your loved ones aware of what is in your will and how they can access the latest legal copies.
Don’t allow your debt to become someone else’s burden
In most cases, when you pass away your debts will become the responsibility of your estate and your personal representative will use your assets to pay them off. If you’d like to ensure your debt is gone long before you go so that your loved ones aren’t left with the burden, begin your debt-free journey today.
Our free How to Manage Debt guide is a great way to learn about your debt relief options. Once you read it, you’ll have a better idea of how to take control of your money and create a financially secure life for you and future generations.
We Weren’t Saving for Retirement Before, Now it’s Even Harder (Freedom Debt Relief)
5 Ways to Improve Your Financial Literacy (Freedom Debt Relief)
Open Enrollment 2021: Should You Change Health Insurance in a Pandemic? (Freedom Debt Relief)
You Need a Will — Even if You’re Not ‘Rich’ (MarketWatch)
*Disclaimer: At Freedom Debt Relief, we do not practice law or give legal advice. This post is meant simply to provide basic information on estate planning and help you start your research if you are interested in making a plan. Please consult an attorney or financial professional for advice and assistance in drafting a will or any other estate plan.