Not rich? You still need a will

By Marilyn Lewis

You almost certainly need a will.

Take, for example, a fairly common estate: a couple of grown children, no spouse, a small savings account, a house with a mortgage and an old, paid-off car.

If you left a will, your executor could sell your possessions, pay off the mortgage and give your kids their inheritances in a few weeks.

Without a will, a state probate court could take six months or more to identify all claims on your estate, identify your heirs, ask permission from each of them to sell your assets, select an executor and then sell and distribute the proceeds. All the while, someone would need to cover the house payments. And your heirs could wind up paying a lawyer $1,000 or more for court appearances.

Without a will, you lose the chance to say exactly what should happen when you're not around to speak for yourself. A will lets you pick a guardian for your children. A will lets you leave instructions and money to care for someone special -- a disabled child or an elderly parent, for example. It lets you ensure that cousin Julie gets Aunt Gussie's Blue Willow china or that your three children inherit the proceeds of your estate equally.

Yet half of Americans don't have wills because they're afraid to think about death, reluctant to part with the money it costs to prepare one or simply ignorant of the need.

Here's how to tell whether you need a will and whether you're a good candidate to draw one up on your own. Many of us are.

What a will doesn't cover

You may already have done some estate planning without realizing it.

Whenever you open a bank account, an individual retirement account or a 401(k) plan, or buy life insurance, you're given -- or you should be given -- a form asking you to identify a beneficiary who'll inherit the money when you die. There's no charge for assigning beneficiaries. When you die, the property goes directly to them, and they pay no federal estate tax or income tax. It is taxable, though, if you identify your estate as the beneficiary.

(Some states also impose their own, smaller inheritance taxes. The rules and rates for these vary widely.)

"It is pretty common today for a typical middle-class person to have more property passing outside probate than inside probate," says Robert H. Sitkoff, an expert on wills and trusts who has -- literally -- written (co-authored, actually) the book on the subject, "Wills, Trusts, and Estates." "Nothing, not even contradicting yourself later in a will, trumps that beneficiary.

(Keep copies of these "beneficiary assignment" forms and update them occasionally so that your ex doesn't wind up inheriting the 401(k) plan you started in 1987.)

Another substitute for a will is joint ownership. When two people own a bank account or real estate and one person dies, the property automatically goes to the other, without probate.

If you die owing money, your heirs won't be on the hook for it unless they've co-signed a loan or own property jointly with you. But your debts must be paid from your estate before your heirs can get their share. (See "When your parents die broke.")

The bottom line: If everything you own has someone else's name on it, either as a beneficiary or a joint owner, you might not need a will. But make sure you haven't forgotten anything, like cash, items in a safe-deposit box or a car that's in your name.

So why so shy?

Jennifer Hartman, a Los Angeles financial planner, is frequently surprised to find clients without wills. "People you expect would have a will -- educated, good incomes, professionals, a lot of them with children -- don't have them," she says.

The reasons? For a lot of folks, the big obstacle is talking -- no, thinking -- about death. It's understandable, Sitkoff says.

"Look," he says, "they call death insurance life insurance. They say, 'If something should happen to you.'" He laughs. "If?"

There's also the expense of preparing a will: a few hundred to thousands of dollars, depending on the will's complexity, for something you'll never get to enjoy. "I understand the impulse to say that I don't want to spend money today to distribute my money when I die," says Sitkoff.

This massive shunning of wills demonstrates, at least in part, that the legal profession has priced its services beyond the reach of millions of Americans, says Theresa Meehan Rudy of consumer group HALT. Her organization is dedicated to helping consumers get equitable access to the law.

Continued: Thrifty ways to create a will

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