(provided by Dick & Karen Sayre, Sayre & Sayre, p.s.)
There are many good reasons to use a Last Will and Testament ("Will") to transfer assets upon your death. First, and most importantly, it allows you to be certain that those who you want to inherit your estate will receive it. In the absence of a Will (or other arrangements to pass your assets at death) a Washington statute sets forth designations as to who will receive your assets. If you are married and the bulk of your estate is comprised of community property, your spouse will inherit most or all of your estate. If, on the other hand, you die with a significant amount of separate property that you wish to convey to others, your desires my be thwarted by the effect of state law. Basically, the order of the right to inherit is spouse, children, parents then siblings, unless you have a Will.
With proper planning a married couple a can currently pass up to four million dollars in assets to their beneficiaries free of estate tax. This requires the inclusion of a special tax saving trust inside your Will. It takes effect on the death of the first to die spouse but not before. Tax laws change regularly and the amount you can pass tax free is due to make some significant changes in the next few years. You should check with your attorney whenever your financial situation changes to be certain that the plan you have in place takes full advantage of all possible ways to minimize estate tax. Donations to charitable organizations can be included in a distribution plan for your assets.
For young parents, arrangements can be made to designate a guardian for minor children who can access assets for their care and education. As an example, if you and your spouse die and leave property, cash or insurance proceeds to your children as your heirs, and they are under the age of 18, the Probate Court will appoint a guardian to manage these assets until they reach that age. The guardian and attorney will be paid out of the funds you intended your children receive until such time as they reach age 18. When they reach that age, they will receive all of their share of the estate. If you think back upon your level of maturity at age 18, we're sure you would agree that inheriting a large sum of money at that point in time might not have been the best thing that could have happened to you.
You can solve this problem with a properly drafted Will, which creates a trust held for the benefit of the children. You may name a bank, relative or close friend as trustee and can direct that it be paid out in increments at whatever age you feel appropriate. We often use a trust which pays income at age 21, and a percentage of the principal at ages 25 and 30. We are fond of explaining to clients that, at age 21, their children are likely to be in college and will have need for some income from the trust at that point in time. At age 25, we recommend distribution of half of the principal of the trust, under the theory that the children are likely to be getting married or having children of their own, and could use some additional funds. Finally, we disburse the remainder of the trust when the children reach age 30, under the theory that, at age 30, they might know what to do with the money. You can set up these trusts in any fashion you wish, to disburse at any ages you wish. Additionally, they can be designed to permit the child to withdraw principal prior to the distribution intervals for medical, educational or maintenance needs. Trustees can also be empowered with various levels of authority to handle the assets. Without a Will, you cannot exercise any such control. A Will could provide for incremental distributions over time while still allowing the assets to be available for the beneficiary's maintenance, education, support and health needs.
Wills can also include specific provisions to permit assets to be set aside for your spouse or other beneficiaries with special needs and disabilities. By making these arrangements your disabled beneficiary may receive supplemental services not available under state and federal programs while still protecting their ability to maintain eligibility for benefits under those programs. This is not only important to protect a disabled spouse, but also for parents with disabled children and grandparents whose estate is set to be distributed to a child who has a disabled child. If the parent of a disabled child dies prior to the death of the grandparent, many estate plans will pass the share of the deceased child to that child's children and so to the disabled grandchild. This could cause the disabled grandchild to lose needed medical and income benefits.
To determine what arrangement are best for you and your specific circumstances always seek the advise of competent legal counsel who are experienced in estate and disability planning.