By Jon L. Ten Haagen, CFP
Q: I have a will which was described as a simple will which I got when I first got out of school years ago. Should I re-address my will, and what should I be aware of? I have heard of the terms “I love you will” and the “Catastrophe Clause.”
A: A good number of years ago my family had a terrible tragedy when our parents were killed in a car accident. Mom died instantly and dad lingered for an hour or two before he passed. They had an “I Love You Will,” which basically says, “I love you, dear, and I leave all my possessions to you,” and vice versa by the other spouse. The problem here is that mom’s estate went to dad who got no benefit since he died within hours. This also made the estate of one person bigger, and therefore bigger taxes to the estate.
What should be in place is what I call a “Catastrophe Clause,” which states for both parties that “If my spouse does not outlive me for six months” – you can choose whatever amount of time you want – “they are not entitled to my estate and it will go to my contingency beneficiaries.” This keeps the estates separate and smaller for tax purposes. Happily I got the courts to allow my father to reject mom’s estate, and we then dealt with two smaller estates and smaller taxes. I am glad I am a CFP so I can help others with their planning.
Another consideration is if a common disaster occurs and both spouses expire at the same time; in cases like these, the medical examiner cannot determine who expired first. Work with an estate planning attorney to get all the details in your will addressed for the best benefit to your family. For tax purposes it should be stated in your will as to who will be determined to perish first.
If there are multiple divorces and remarriages and children from both marriages, you must work with a competent knowledgeable estate planning attorney to make sure you assets go where you want them to.
What if you die without a last will? State law will determine who gets your property. This process is called “intestate succession.” In most states, your property would first be divided between your spouse and your children. If you are not married and have no children, your property would be distributed to your closest living relatives. If the administrator of your estate cannot find a living relative entitled to your property under the law, the property will go to the state.
The bottom line is getting a will. It is not true that if you make a will something bad will happen. The reason for a will is to tell your family members how assets should be distributed. Name guardians for your children if you pass away; make specific gifts (called bequests) to people or institutions; avoid estate taxes; and protect your spouse from debts and other obligations. Even if you do not have assets now, a will is a good idea. You can always add items to your will in the future.
Remember, your living will dictates where your personal assets are going. Your 491k, 493b, 457, IRA and ROTH IRAs all have their own beneficiary designations and therefore are not controlled by your will. Make sure you revisit your beneficiary designations each year in case there has been a live change (birth, divorce, marriage or death).
Address with your advisors things like wills, living wills, health care proxies, durable power of attorney, and living trusts. All these legal documents work together to satisfy your various legal needs.
Jon L. Ten Haagen, CFP, of Huntington, is an Investment Advisor Representative offering securities and advisory services offered through Royal Alliance Associates, Inc., member FINRA/SIPC and a registered investment advisor. Ten Haagen Financial Group is not affiliated with Royal Alliance Associates, Inc. or registered as a broker dealer or investment advisor.
Disclaimer: The advice offered in this column is intended for informational purposes only. Use of this column is not intended to replace or substitute any professional advice. This column, its author, the newspaper and publisher are not responsible for the outcome of following any advice that appears here.