Who Needs a Will (And What a Will Does)

by Paul N. Frimmer
Estate Planning Attorney
Member Emeritus, National Board of Trustees, 
The Leukemia & Lymphoma Society

It is commonly said that everyone needs a will. While this generalization is true more often than not, many individuals can dispose of their property effectively without a will. This article will address the question of what a will is, what it does, and who needs one.

What is a Will?
A will is a document that disposes of your property at the time of your death. Until your death, your will has no legal effect, and unless you have made an agreement that you will not change it, a will remains changeable until the moment of death.

The great mystery surrounding wills probably is traceable to the formalities with which they must be signed. These formalities come from the early English law, and with some modifications, the requirements of English law remain today. These formalities are necessary because you will be deceased when the terms of the will are carried out, and it is not possible to ask you what you meant, nor is it possible to determine directly whether you were competent to sign the will or whether you signed the will under circumstances in which you did not act freely.

Generally, for a will to be valid, you must sign it in front of two witnesses who are not beneficiaries. The witnesses also sign a portion of the will that states that you were competent when you signed it, and that you were not acting under fraud, duress or undue influence. Some states also require that the will be signed before a notary public.

A will signed and witnessed in accordance with this procedure is called a "witnessed will." It is possible to have a valid will which is not witnessed. This form of will, which must be entirely in your own handwriting, is called a "holographic will." The requirements for a holographic will differ from state to state, and this form of will is not recognized in all states. Before attempting a holographic will, you should consult with an attorney who will advise you what the requirements are for preparing one.

If you do not comply with the requisite formalities, your will will be invalid and will not dispose of your property. Therefore, it is very important that you consult with an attorney or other knowledgeable individual before signing a will yourself or helping someone else sign a will.

What Does a Will Do?
1. The primary purpose of a will is to designate who will receive your property at the time of your death. A will only disposes of property the title to which is in your name. It does not dispose of property held in joint tenancy or tenancies by the entireties form, both of which forms of property pass to the surviving tenant. It does not dispose of "in trust for" bank accounts which pass to the person for whom the account is held; it does not dispose of property that is distributed in accordance with a beneficiary designation (such as life insurance, pension and other employee benefit plans, and annuities); and it does not dispose of property held in a trust.

For example, if your will leaves everything to your spouse, but some bank accounts are held in your name "in trust for" your children, other accounts are held in joint tenancy form with your brother, and your group life insurance policy names your parents as beneficiaries, none of this property will pass to your spouse at the time of your death, even though your intent may be to have your spouse receive all the property.

If you die without a valid will (called dying "intestate"), the laws of the state in which you are domiciled at the time of your death will determine who receives your property. Although state laws differ, generally, property of an intestate estate is distributed as follows:

a. Community property passes to your spouse.

b. Separate property passes one-half to your spouse and one-half to your children if there are two or less children. If there are more than two children, one-third of the property passes to your spouse and two-thirds is divided among your children. Therefore, if you are married and you want to leave all of your property to your spouse, you need a valid will because if you die without a will, a certain portion of the property will pass to your children.

c. If you die without a spouse and without children (or more remote descendants such as grandchildren), the property generally passes to your parents, and if your parents are deceased, to your brothers and sisters.

d. If you leave no relatives, the property may pass to the state.

2. Besides designating who receives your property at the time of your death, a valid will serves many other purposes:

a. If you die intestate and property passes to minor children (under age 18 in most states), any such property will be subject to a guardianship. The court will appoint a guardian to manage the children's property during minority. When a child reaches age 18, the child will be entitled to the property. During the time that the child is a minor, the guardian will have to apply to the court if the guardian wants to spend money on behalf of the child, and the guardian will have to account to the court every year in a relatively expensive proceeding so that the court can review what the guardian has done with the child's property during the year. While all of these procedures are designed to protect the child's property, there are better ways to protect the property, all of which can be accomplished in a valid will.

b. Whenever property is left to young beneficiaries, the property probably should be placed in trust rather than in a guardianship. A trust is an arrangement whereby an individual or trust company ("trustee") manages and distributes property for the benefit of someone else ("beneficiary"). Instead of having the court appoint a guardian to manage your child's property, you may designate a trustee who will manage the child's property. A trustee can be excused from filing expensive accountings with the court every year, and the trustee is not required to get court approval before making any distributions to or for the benefit of the child. Also, the trust may provide that the child receives the property at specified ages other than age 18. Because most parents consider age 18 too young for a child to receive substantial amounts of property, the creation of a trust allows the parent to give the child the property at more appropriate ages.

c. If you have minor children at the time of your death, and if you do not leave a will designating a guardian of the person of the minor children, the court will appoint a guardian of the person. The guardian of the person should be distinguished from the guardian of the property. The guardian of the person acts as the child's parent, and the guardian of the property acts as the manager of the child's property. These individuals may or may not be the same, and the qualities necessary to act as a substitute parent are different from the qualities necessary to manage property. If you have a valid will, you may designate who will act as the guardian of the person of any minor child. Although the court always reserves the right to name a suitable guardian of the person of a child, the court rarely will overturn a parent's choice.

d. If you die without a will, the state determines who will act as the administrator of your estate (the person who gathers all of your property, pays your debts, and pays any taxes that may be due before distributing the property to those who are entitled to receive it). The administrator usually is required to post a bond to prevent him or her from absconding with the money during the period of administration. The bond may be expensive, and the expense of the bond is deducted from the assets passing to your relatives. In addition, the administrator is entitled to a fee which is generally set by law. This fee also is deducted from the assets passing to your relatives. With a properly drawn will, you can designate the individual who will take care of these functions after your death (this individual is called an executor, or the more modern term "personal representative"), and you may provide that the personal representative is not required to post a bond. Presumably, you will appoint someone you trust, and therefore, it should not be necessary for that person to be bonded. In addition, you may choose someone who either will agree not to take a fee or who you are confident will not take a fee. For example, if you leave your entire estate to your children and appoint your brother as personal representative, it is likely that your brother will act without charge because any fee that he takes will reduce the property passing to your children.

e. There are other reasons for creating trusts in your will:

(1) If your estate has a value in excess of $1,500,000 (the amount of the current exemption from estate tax that is available to every individual), maximum tax savings only can be achieved through proper planning. Proper planning in this context means leaving your property by will (or other properly drawn dispositive instrument such as a living or revocable trust).

(2) A trust gives you the opportunity to provide some protection for the beneficiaries of your estate. For example, if you leave your entire estate outright to your spouse, there is no guarantee that your spouse will leave the property to your children; he or she is free to leave the property to a second spouse, charity, or anyone else. Your will may create a trust for the benefit of your spouse which will give your spouse all of the benefits from the property, but which will insure that the property passes to your intended beneficiaries (children or others) upon your spouse's death.

(3) Likewise, you may want to leave your property to a beneficiary who is physically or mentally disabled, who is financially irresponsible, or for whom the receipt of substantial property would be damaging because of substance abuse, the stifling of incentive, a pending bankruptcy proceeding, or any other good reason. A will allows you to create a trust for the particular beneficiary and to direct the trustees to distribute the property in a manner which will be most appropriate for the beneficiary.

Do You Need a Will?
You now should have some feeling for whether you need a will. It is impossible to analyze in this article all of the circumstances that would make it desirable for you to have a will, but unless your estate is very simple and the property will be left to capable individuals automatically under the law, you should consider having a will prepared. For example, if you are a widow whose sole asset consists of cash of $200,000, and your sole beneficiary is an adult child who is a responsible individual, placing your cash in an "in trust for" account for your child probably is all that is necessary. Because the "in trust for" bank account passes automatically at the time of your death, there will be no expensive probate proceeding, there is no reason to appoint a personal representative, there should be no death taxes, and you should have no concerns about your child's ability to manage your property.

If, however, you have an estate in excess of $1,500,000, you have minor children, you wish to provide for special needs of one or more beneficiaries, you wish to designate who manages your property, or other circumstances exist which make it important that you exercise control over the distribution of your property, you should to have a will or other properly drawn instrument (such as a living trust) which disposes of your property.

When Should You Change Your Will?
Until you die, your will may be and should be changed as circumstances dictate. Some of the circumstances which should prompt you to review your will are as follows:

1. A significant change in the tax laws. Most significant changes are reported in the newspapers or are the subject of mailers sent out by attorneys, accountants, real estate agents, or securities brokers. If you became aware of such changes in the law, you should review your will with a competent professional.

2. If there is a change in your family situation, such as marriage, divorce, the birth of additional children or grandchildren. The laws of some states automatically remove your spouse as a beneficiary after a divorce, but the laws of many states do not. To remove a divorced spouse as a beneficiary, it may be necessary to change your will. If you recently have had grandchildren, you might wish to provide some gifts to the grandchildren even though most of your estate will pass to your children.

3. If you move to another state or change your employment. Although your will probably will be valid in the new state, the new state may have peculiar rules about certain aspects of wills and probate. Likewise, if you change employment, your new position may give you certain rights in employee benefits, some of which can be affected by your will.

4. General review. As a general rule, unless something specific happens in your life or in the tax laws, it is a good idea to take out your will and read it once every three or four years just to make certain that it still expresses your desire. For example, when your child was three, you may have provided for distribution of your assets to him when he became 25. Now your child is 22, and it may or may not be appropriate for him to receive the property at age 25.

In recent years, the living trust (or revocable trust) has become a popular substitute for a will. 

About The Author Paul N. Frimmer is a partner in the Los Angeles and Newport Beach, CA offices of the law firm of Irell & Manella, LLP. The head of the firm's Personal Planning workgroup, Mr. Frimmer specializes in estate planning, wills and trust, probate and trust administration, postmortem tax planning, probate litigation, charitable giving, and tax issues relating to these matters.  Mr. Frimmer is also a member of the firm's art law workgroup, specializing in the estate planning aspects of owning art collections, and has authored or coauthored more than 50 publications on estate planning and related areas. He earned his law degree, cum laude, from Fordham University Law School.  He is admitted to practice in California and New York and is a California Certified Specialist in Probate, Estate Planning, and Trust Law. He is also a fellow of the American College of Trust and Estate Counsel and the International Academy of Probate and Trust Law. Mr. Frimmer has been an active volunteer for The Leukemia & Lymphoma Society for the past 30 years, has served as a member of its National Board of Trustees and has chaired its Planned Giving Subcommittee.

If you would like more information, please call Mary-Gail Smith, National Director of Planned Giving, at (888) 773-9958.   

Special Note: This article was current with tax law when it was posted August 2003.  Congress periodically considers legislaton that could bring substantial changes to gift and estate tax law.  Such provisions are typically phased in over a multi-year period.  As you consider your plans, please check with your advisors for the latest provisions.

Read earlier articles in this series:

"Do You Need Estate Planning?"