You might think that you know about Wills, but there is still a lot about the process that you get wrong. This is especially true in today’s environment, where people post information online that might be wrong, inappropriate for your situation, or inapplicable to you because of where you live. Today I’m going to expose some shocking truths about Wills.
You Can’t Disinherit Your Spouse
Wills can do a lot of things, but one thing they can’t achieve is totally disinheriting a spouse. This comes as a shock if you’ve been reading all of FastWill’s blog posts about how you should have a Will to ensure you have a say over what happens to your assets when you die. State laws vary on how much a spouse inherits as of right. In New York, for example, one-third of the estate must go to the spouse. So, why are spouses the exception to the general rule on disinheritance? Mainly because it was a policy choice by lawmakers that it was better not to have a spouse be destitute if their spouse disinherits them in the Will. The law discourages people from getting revenge on their spouse with disinheritance. Besides, there are other legal mechanisms for getting out of a bad marriage - namely, no-fault divorce. If you do feel like disinheriting or limiting your spouse’s inheritance, there’s a way around the strict inheritance rules, and that’s called a contract. A prenuptial agreement, to be exact. You can also ask your current spouse to sign a postnuptial agreement after you’re already married, which would limit their inheritance. However, if you choose that route, watch out for flying plates!
Children Don’t Have a Right to an Inheritance
We talk a lot about how to protect your children through estate planning, but it may surprise you to learn that children can’t legally inherit from a parent while they are minors. That’s mostly because minor children are rarely able to enter into a contract until they are age 18 legally. You can, however, leave an inheritance to your child that will be managed by a legal adult until the child reaches the age of maturity. People can also opt to leave their children's money or assets in a trust, which will also be managed by an adult until they come of age.
There are some important legal considerations to child inheritance. In many states, minor children have a right to inherit at least a share of the family residence. The Florida Constitution prohibits the head of household from disinheriting his or her family from the family residence by Will. Most states also have laws that prevent any unfairness for children who are born after a person dies or children who were not known to the parent at birth. For example, if a child is born after the testator dies, some states assume that the parent never intended to omit the after-born child and therefore that child will inherit an equal share as their siblings. In some jurisdictions this rule applies to children who were illegitimate - i.e. not born during a marriage - or who were only identified after the testator died.
But a Child’s “Inheritance” Could Make Your Spouse Destitute
In some states, the children automatically inherit half of the estate. You might assume that means the surviving spouse will essentially inherit for the minor children, but this isn’t the case. In jurisdictions following this rule, a court-appointed guardian will receive and manage the children’s inheritance. And what’s more distressing for the surviving spouse is that the children’s inheritance can’t be used for their support. It’s important to recognize that if you are in a jurisdiction following this rule, your spouse’s standard of living could be diminished by this rule. There are ways around this - and the best one might be having a life insurance policy naming the spouse as the sole beneficiary.
Some Professionals Can’t Bequeath Their Businesses
Some professionals might find it shocking that they cannot pass on their business to their family members. But if you have a law practice, a medical office, or are a financial advisor, or an accountant, you don’t have a family business unless your heirs are licensed in that field. For inheritance purposes, a law practice is treated differently than a diner, for example. You can only leave these businesses to someone who is legally able to operate the business. To go back to our example, a person without a law license can’t legally practice law. Practicing law without a license is illegal and can expose someone to big penalties.
What does that mean for the future of a professional practice that you’ve built? It means the business is worthless when you pass away. Your heirs will only be able to close the business and your clients will seek other professionals. If you want to maximize the value of the business, you will sell it during your lifetime. You could also hire someone to be your successor and give them the right to buy the practice when you die.
Adults May Have to Split Their Inheritance With Their Spouse
In many situations, an adult who gets an inheritance may wind up having to split that with their spouse in the event of divorce or death. Let’s imagine you inherit $500,000 before you get married. That money won’t be yours if you put it into an account that you later share with your spouse. If you don’t do this, and down the line you get divorced, some states will say that the inheritance is a joint asset, and you’ll be splitting that $500,000 with your ex. Again, it’s important to remember that this law varies from state to state. You can avoid this scenario entirely by keeping your inheritance in a separate, private account, or even putting it as trust property.
You Probably Don’t Need a Lawyer to Make a Will
Estimates vary, but most experts conclude that only around a third of all Americans make a Will. Even for people over age 65, the number is shockingly low - 24% of older people still don’t have a Will. One culprit for this phenomenon is probably that it’s expensive to hire a lawyer for a Will. Finding and hiring a lawyer is intimidating to many people. Most people believe the law is so complicated that they would be foolish to draft their own - so they die intestate and their loved ones wind up with a long probate process that wasn't necessary.
All of that seems pretty grim, but here’s some good news: the vast majority of people don’t need a lawyer to draft a Will. If you use an online service like FastWill, you can do it within minutes. Don’t believe me? These are the steps you would take: First make an account. Second, pick and executor. Third, identify beneficiaries - the people you want to inherit your assets. Fourth, list your debts so that your executor knows to pay them. Fifth, you will execute your Will in accordance with state law. FastWill makes sure you know exactly how to witness and sign the document. And that’s it - there is no big secret to making a Will. Unless you are Bill Gates, you can do this without hiring an attorney.
