Why You Need A Will - Brief Article

MOST African-Americans spend much of their lives pursuing the trophies of success. But roughly 80 to 90 percent forget the one thing that can ensure a legacy and provide for their family after they're gone--a will.

"You're talking about an event that most people don't like to talk about, and that's dying," says Olin Wiley, an estate planner from Atlanta. "By and large, people just don't know the price they will pay, and their heirs will have to pay, for not knowing."

What is a will?

The most basic of estate-planning documents, a will is essential in determining the disposition of your property, and assets, perhaps even who will take care of your children at the time of your death. Experts say that all too often people die without having done any estate planning, and their property, becomes controlled by the state. You may want your college alma mater to have a generous donation at your death, but if you don't make your last wishes known, that money may go somewhere else.

"One of the things that often happens after death is conflict and confusion about the wishes of the deceased," says Cseneca Parker, client liaison for the East Bay Community Law Center in Berkeley, Calif. The law center provides legal services to low-income East Bay residents. "If there is a will, it saves a lot of headaches."

For the most part, experts say, if you are under age 50 and don't expect to have a large estate that would be subject to an estate tax (an estate worth roughly $675,000 or more), you can probably get by on a basic will. As you get older and acquire more property, or assets, you may want to consider a more complicated estate plan.

Any adult of sound mind can make a will. In most states, a will must be typed or computer-generated, expressly state that it's your will and that you have the right to distribute the property, and assets outlined in the will. Most wills have to go through probate, a public process that can tie up your estate for nine months to 2 years, and can cost as much as 5 percent of your estate's worth in legal fees. Once the will is entered into court, it becomes a public document.

Keep in mind, experts say, that a will is the absolute minimum and does nothing to reduce estate taxes or keep your estate from going into probate, which are both very costly procedures. At the time of your death, if you only have a will, more than half of your assets go to the state to pay off your estate taxes. If there's no cash in the estate, the state will sell off the property; piece by piece, until the debt is paid. To reduce estate taxes and keep your affairs private, you will need additional documents.

A Living Trust

A living trust, for example, is a document that changes the ownership of certain assets from your name to the name of the trust. One of the most common estate-planning tools today, the benefits of a living trust are that your estate can pass to your heirs without going through probate.

Once you establish a living trust, which is completely private and costs between $500 and $1,000, you can place almost anything in it, including bank accounts, bonds, stocks and life insurance. Living trusts do not, however, reduce taxes for individual estates valued at more than $675,000, or $1.35 million for married couples. If your estate is valued at or above these amounts, then you may want to consider combining a living trust with more advanced estate-planning techniques.

Charitable Donations

Another way to provide for your loved ones is by making annual gifts to charitable causes or institutions. Giving today not only reduces your estate (and your possible estate tax liability), but also allows you a legacy of philanthropy.

Every U.S. citizen can give away up to $10,000 per year. But you have to be careful to save enough not only to maintain your lifestyle, but also to avoid overcontributing, which can result in your paying high taxes on the amount over your yearly limit. Those taxes, in some cases, can be as high as estate taxes.

"Historically, we have not done a good job of transferring our wealth from one generation to the next," Wiley says. "Now, with newfound wealth, wealth-transfer strategies or techniques are something we definitely need to learn more about."