One of my 2013 New Year’s resolutions was to make a will. I dilly-dallied all year, but I finally got it done towards the end of 2013. Actually, I have been meaning to make a will ever since our kid was born. It’s just too easy to keep putting it off. I’m relatively young and healthy, so it’s inconceivable to think about death at this point. However, a will is a necessity for many of us and here are some reasons why.
Every parent with children needs to have a will. You need to decide who will take care of your children if something happens. If you don’t have a will, the state court will decide for you. My brother Nik agreed to take care of RB40 Jr., so I designated him as the guardian and trustee.
I also don’t trust a minor to make good financial decisions, so I set the inheritance age to 22 and 30. Nik will use the inheritance to pay for Jr.’s education. When he turns 22, he’ll inherit 50% of what’s left after paying for college. Then he’ll get the rest at 30. I’d like him to try to make his own money before getting a windfall.
Michael Babikian, President & CEO of Transamerica Brokerage, offers an additional reminder. “Don’t forget to update your will as each new child or grandchild is added to your family. Tax season is the perfect time to review your will each year to make sure that everything is up to date.”
Who get your assets?
For me, it’s pretty simple. Mrs. RB40 gets everything when I go. If both of us pass away at the same time, then everything goes into a trust. Nik, my trustee, will use the trust to pay for RB40 Jr.’s higher education. The kid will then receive 50% of what’s left when he turns 22 and the rest when he is 30.
Doh! I forgot to designate more backups. I’ll need to revise the will to include my younger brothers. This is really depressing, but we need to think it through. If you don’t have a will, then the court will decide how to divide your asset with a formula. Modern families are very complicated and I’m sure you want the final say, rather than depending on someone else’s formula.
Note – You should make sure all your accounts have the correct beneficiaries as well.
Regarding estate planning, Babikian adds “to put it simply, your estate is all your stuff, such as material goods and the financial commitments you have made such as mortgages and car loans. If you have one or more of the following: house, car, bank account, retirement savings, life insurance and bills — you have an estate.”
The federal government wants a piece of ‘all your stuff’ if your estate is more than $5,250,000. You can reduce this tax by setting up irrevocable trusts and giving money away to charity and/or family. Most families don’t have over $5 million in assets, but if you do, you need to work on a plan with a good estate planner.
Some states also collect estate tax and Oregon where we live is one of them. The estate tax exemption is much lower in Oregon at $1,000,000. The tax rate on assets over a million dollar starts at 10% and goes up to 16%. That’s A LOT of tax! I’ll have to make it my mission to not die while I’m a resident of Oregon…
One important part of making a will is appointing an executor. The executor will be in charge of your assets after your death. You need to find someone you trust so they won’t squander your assets. Again, if you don’t have an executor, then the court will decide for you. If you have a big family, then you really need to figure out who you want to be your executor. Is it your mother, father, brother, 3rd cousin, or just a friend you really trust?
A will is also a place for any last words. I want to donate my organs, but it that doesn’t work out, then the body can be donated to science. I don’t want my family to spend a lot of money on funeral arrangements. If you have any last words for your ex, this is probably a good place to let him or her know how you feel…
I finished making a will, but there are still a few things to follow up on.
- Find 2 witnesses and sign it. I need to do this ASAP so the will is official.
- Send a copy to my brothers.
- Make a list of all our assets and put it in the same folder.
- Create a detailed plan for what to do with the assets. For example, Mrs. RB40 wouldn’t want to deal with rental properties if I’m not around. I need to come up with a plan and run it by Mrs. RB40 and my brothers.
Whew. Creating a will is not easy, but at least I took the first step. If you have children or assets, you need to sit down and create a will. I went with an online vendor who helped me create my will, it covers our family’s needs without breaking the bank. The primary purpose of this will is to name a guardian for our kid. We’ll need to work with an estate planner once we accumulate more assets, but I think this is good enough for now.
Do you have a will? Would you trust the state court to decide with to do with your children and assets?
*This post is sponsored by Transamerica Life Insurance Company, however all thoughts and opinions are my own. This blog is general information only. Transamerica does not provide legal advice and the information in this blog should not be considered legal advice or a substitute for individualized legal advice. Consult a qualified attorney to help with estate planning.
Photo credit: flickr SalFalko