Who needs a will?
Ispoke to a group of realtors recently, and in preparing for that presentation, asked the group's coordinator if there were any issues they had run into that I could address. Her immediate response was “What happens when a spouse dies?
What about probate?” Well, of course,
I'm not an attorney and I don't give legal advice, but what I do in financial planning is first cousin, as my mother would say, to that arena when it comes to family business. So let's talk about it.
To begin, what is probate? The
American Bar Association defines probate as “the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.” Does every death initiate a probate process? No. With proper estate planning during a person's lifetime, the opportunity to avoid a probate situation might be available and appropriate; sometimes probate, itself, is not the thing to work to avoid, but the haggling among relatives DURING the probate is. Regardless, proper planning with your financial professional(s) and attorney can help to ensure that events after your death are as hassle-free for your family as possible.
According to an article on LegalZoom.com, LexisNexis reports that some 55 percent of American adults do not have a will. For minority populations, that number ranges between 68 and 74 percent. So what happens when a person in Mississippi dies without a will, otherwise known as dying “intestate”?
Succession laws exist to determine the order of inheritance when a person dies intestate. Only assets that would have been included in a will, if you'd had one, are affected by intestate succession laws. Typically, that includes only assets owned by you alone, in your own name. Some examples of assets that would generally not be affected would be assets transferred to a living trust, property you own with someone else, or assets that name a beneficiary, such as most retirement accounts, annuities and life insurance. Those assets would transfer on your death to the co-owners of the property and to the named beneficiaries.
But what about those properties that ARE affected by your dying intestate? Does your spouse automatically receive the land Uncle Clarence left you back in '86? Not if she doesn't own it with you. In Mississippi, here's the basic order of succession when a person dies without a will, if you die with:
Children and no spouse…The children split all assets evenly. Spouse and no children…The spouse inherits everything. Spouse and children… They inherit everything in equal shares, meaning the spouse gets a child's share. (This includes second marriages after the parent of the children dies, which I've seen to be problematic!)
Parents but no spouse, children or siblings… The parents inherit everything.
Siblings but no spouse, children or parents… The siblings inherit everything.
“There are further directives regarding different scenarios, other types of descendants, and even types of children (step-children, adopted children, children conceived during your life but born after your death….the list goes on.). The Mississippi Secretary of State's Office website has a full list and explanations.
While your head stops spinning, let's look at a story. A client and I met with her attorney a year or so ago, and he told a story about a case he had been working on. Jack was married to Diane. (I'm a child of the eighties… go with it.) This was a second marriage for Jack; he had two teenage children from his first marriage, with whom he had no relationship, and two with Diane. They had just built a new home together and were in the process of trying to sell their previous home, which Jack had brought into the marriage, never having put Diane's name on the deed. He also owned a good bit of family property, all in his name, and he worked for himself as a logger. Jack was fatally injured on the job one day, and he died, never having “gotten around to” creating a will. According to the laws of Mississippi, upon Jack's death Diane now owns the new house… and the mortgage that goes along with it. As for the old house with no mortgage, she owns one fifth, along with her two children and two step-children, whose still-angry mother (ex-wife) will not agree to sell it. Same for the land. Very fortunately for Diane, Jack was a strong believer in life insurance, and he had, upon their marriage, taken out a sizeable life insurance policy, naming her as the sole beneficiary. Because life insurance doesn't pass through an estate, upon proper notification, the insurance company promptly paid the death benefit to Diane, and she was able to have an income for herself and her young children; unfortunately, much of those life insurance proceeds will now be used to fight her late husband's children's mother in court. Thank goodness for the life insurance, but the situation could have been so, so much simpler with an hour's visit to an attorney and financial advisor.
The moral of the story? There simply is no acceptable excuse for “not getting around to it” when it comes to protecting your family, whether that's through proper execution of a will or through life insurance or both. Make that call and rest better tonight, please.
Barbara Runnels Coats, MBA, FICF, RICP, Modern Woodmen of America Financial Representative
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