Only 32% of Americans have a will, living trust or other estate planning document, according to a 2020 survey by Caring.com. That means a majority of Americans don’t have a written plan for how they want assets distributed when they die.
If you are among those without a will or living trust, loved ones you leave behind will have to deal with the consequences of your lack of planning. Keep reading to find out why your parents need a will or living trust.
Reasons to have a will
You might think you don’t need to bother with a will because your family can just divide up everything equally when you die. Unfortunately, it’s not that simple.
When people die without a will, the intestacy laws of the state where they lived will determine how their property is distributed. So a judge – not family members – will decide who gets what based on the state’s laws.
Typically, intestacy laws divide property among a surviving spouse and blood relatives. That might be a problem if you don’t want to split everything equally among your surviving spouse and children. It can be an even bigger problem if you live with someone but aren't married or have stepchildren. If you die without a will, your partner or stepchildren might not get anything.
Not only does a will allow you to specify who gets what when you die, but also it allows you to name an executor to act on your behalf after you die. The executor oversees the distribution of property, closes accounts, settles debts and files final tax returns. It’s a big responsibility, so you need to consider carefully whom you want to fill this position.
Be aware that even if you have a will, your estate will likely have to go through probate – the legal process of distributing property. Some assets – such as life insurance policies and retirement accounts with beneficiaries named on those accounts – can bypass probate. And if you have limited assets, most states have simplified procedures that are less expensive and less time-consuming than the traditional probate process, according to the American Bar Association. Otherwise, the probate process takes an average of six to nine months, and costs can vary from state to state.
Reasons to have a living trust
You also could create a living trust to specify how your assets will be distributed when you die. The benefit of a trust is that it allows you to pass on property without the probate process. That can save your heirs time and money. It also can protect privacy because a living trust isn’t made public, yet a will is during the probate process.
A trust also will allow you to specify when and how your heirs will receive assets. For example, you could spell out if you want your children to get an inheritance at a certain age or over a certain period of time.
For a trust to be effective, though, you must transfer assets to it before you die. You also must name a trustee to manage the assets in the trust. You could name yourself trustee then name a successor to manage the trust when you die.
Another benefit of a trust is that it can be used for long-term care planning. The trustee can manage your finances for you if an injury, illness or dementia leaves you unable to make financial decisions on your own. And because your assets have been shifted from your name to the trust, you might be able to qualify for Medicaid – which will pay for long-term care at home or in a skilled nursing facility. However, it’s important to work with an elder law attorney who specializes in Medicaid planning to properly structure a living trust for long-term care needs.
[ Read: How to Use a Trust to Plan for Long-Term Care ]
How to get a will or living trust
Ideally, you should work with an estate planning attorney or elder law attorney to draft a will or living trust and other essential estate planning documents such as a power of attorney document. An attorney will ensure that these documents are tailored to your specific situation, adhere to state laws and are properly signed and notarized to be valid.
An attorney might charge a few hundred dollars to more than $1,000 to draft a will and estate planning documents. A living trust can cost several thousand dollars to create. You can find an estate planning or elder law attorney by searching your state bar association’s online membership database or by asking friends or family for a recommendation.
There are more affordable options if you can’t afford to hire an attorney. You can find downloadable documents online that can suffice if you don’t have a complicated financial situation.
Free options: State bar associations offer free, downloadable wills. Search your state’s name, “bar association” and “free will.”
Fabric, which is an online life insurance company, offers free wills. It also allows you to put the final arrangements you want into writing. Tomorrow, another digital life insurance provider, offers a free will through its mobile app. The Tomorrow Plus upgrade for $39.99 offers access to advanced features such as a living trust.
Low-cost options: Trust & Will offers a customizable will starting at $69 and will mail a bound copy, along with state-specific instructions on how to make it legally valid. It also has a living trust product that starts at $399.
Nolo’s Quicken WillMaker & Trust includes a will, living trust, health care directive and power of attorney for $89. LegalZoom offers a basic will starting at $89 and an estate plan bundle starting at $179 that includes a will, living will, power of attorney and access to advice from an attorney for a year. Living trusts from LegalZoom start at $279.
[ Keep Reading: The Ultimate Guide to Financial Power of Attorney ]
Put final wishes in writing
You also can include you final wishes – what sort of burial and service you want – in a will. However, it’s a good idea to create a separate final wishes document because it can be weeks after someone dies before a will is located and read.
Include all details that are important to you – everything from funeral home preference to favorite flowers, readings or songs. Then your wishes will be known, and your loved ones won’t have to guess what you would have wanted.