1. The Estate Tax doesn’t decide who raises your children.
We hear it all the time: “I don’t have any assets so I don’t need a Will.” But you do have children, and the change in the Estate Tax isn’t going to name guardians to take care of them if something happens to you.
When both parents die, the Georgia Probate Court will look to see who the parents named as guardians for their children in their Wills. If there are no Wills, then the Probate Court decides who will raise them.
Even if you aren’t sure about the person you choose, you are going to make a better informed choice than a Judge who never met you, and won’t meet your children, your in-laws, siblings, and parents until the Probate Court hearing where they’ll be fighting it out.
2. The Estate Tax doesn’t decide who gets your assets.
A properly drafted Will(1), directs where your personal property, real estate, brokerage accounts, investments, etc. go after you are gone.
You can set up Trusts for spouses, children, and grandchildren; you can leave money for your favorite charities; you can specify which family heirlooms go to which child, etc. The possibilities are almost endless.
But while there are Estate Tax implications to some of these decisions, the increase or decrease of the lifetime exclusion doesn’t say where your things go — only how they are taxed when you die.
On the other hand, if you die without a Will, then the state determines where your assets go. And in many states, that might not be where you would think. In Georgia, for example, when a married person dies without a Will, the first beneficiaries of his or her estate are the surviving spouse and children together, not just the spouse. So it is going to be much more difficult to sell or refinance that house when the children own a bigger percentage of it than the widow. And this only gets worse in second marriage situations, or if the parent/widow and the children don’t get along.
So whatever happens with the Estate Tax, if you are concerned about making sure your spouse inherits your assets, or making sure your children don’t inherit assets until they are a certain age, then you need a Will. The Estate Tax doesn’t have anything to do with these decisions.
3. The Estate Tax won’t stop assets from going to your son-in-law or your spouse’s new spouse.
In a Will, you can provide that assets will go into trust for a spouse or a child to make sure those assets never pass outside of your family. You can also provide that assets don’t go outright to children until they are a specific age, or only pass to certain children or grandchildren. You can even protect assets if a child has creditors or a substance abuse problem.
None of these options are available if you don’t have a Will.
And whether the Estate Tax Exemption stays at $5 million or goes down to $1 million, if you have a child with Special Needs or a spouse with a disabling medical condition, or just a son-in-law you don’t really like, you can’t afford to rely on what Georgia law (or any state’s law) provides as the “default” if you don’t have a Will.
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Without a doubt, there are dozens of non-tax reasons that people create Wills and set up trusts for spouses or children, and those reasons are still there regardless of what happens with the Estate Tax.
(1) For purposes of this article, assume that the Will in question is a good Will, prepared by an attorney, and with all the right provisions. Obviously, a Will that isn’t properly drafted or wasn’t signed correctly won’t help at all, and in fact, can be worse than having no Will at all. So if you are considering any “Do-It-Yourself” documentation, see our article called “Read This Article Before You Create a Will Online.”