Wills and Estate Planning for Surviving Spouses: Avoiding the 50% Surprise
Death Without a Will
Rebecca and Jason married 25 years ago, eventually adding two children to their family. To help their kids achieve well-paying jobs, Rebecca and Jason were happy to invest in their kids’ graduate educations – but the couple didn’t save as much as they’d intended for their retirement. Despite this financial setback, they accumulated about $750,000 in an investment account and paid off their house. The couple always intended to prepare a will but never got around to it.
When Jason died suddenly at 79, Rebecca faced two surprises: the shock of losing her husband and learning she’d only receive half of Jason’s estate under Illinois law. Her retirement funds suddenly split, with half of the estate going to her and the other half to their children.
Thousands of surviving spouses face this surprise yearly, stemming from the laws of intestate succession. Intestate means you died without a will, which enforces rules about the distribution of your assets. In Illinois, you can find those rules in a portion of the Probate Act (755 ILCS 5/2-1., et seq.).
If you’re married with no children, your spouse will inherit your entire estate when you die. If you have children, half of the estate goes to them. Sometimes, the law happens to give your assets to the people who you’d want to get them – but a one-size-fits-all approach works out poorly in some situations, like the one facing Rebecca.
If you are unmarried without children, your money is distributed to your parents, brothers and sisters – while these could be the people you want included in your will, that’s not always the case. If you have a long-term unmarried relationship, your partner might miss out on the entire estate. If children under 18 years old receive money, other complications can arise. Ensure that your money is distributed to those you want to have it.
Why Should I Prepare a Will?
Preparing a will allows you to decide where your money will go when you die. Most of us don’t want to think about death, which makes people put off creating a will combined with fear of the cost. These responses are understandable, but they aren’t an excuse to put off preparing your will – it’s an essential step in protecting our loved ones.
Making an Estate Plan
While creating an estate plan can be expensive, handling the basics doesn’t need to be cost-prohibitive. If Rebecca and Jason had hired a lawyer to prepare a simple estate plan, they could have expected to pay anywhere from $1100-$1800. That plan usually covers wills, powers of attorney for health care and property, and meetings to sign documents and review beneficiary accounts. Compare that against the cost of not preparing a will – Rebecca lost over $500,000 because there was no will in place.
Estate plans can undoubtedly cost more to prepare. People have different goals with their estate plans. For example, some people are eager to create a plan to help their family avoid the costly and time-consuming probate process after their death. For that reason, they may decide to make trust agreements or other estate documents that will allow assets to pass to the family simply and less expensively.
Some people also worry about avoiding certain taxes that may apply to their estate. Especially in a more significant estate, this can be money well spent. However, even a simple will can make a dramatic difference to your family.
Look Out For Your Family
People like Rebecca and Jason should take a few minutes out of their busy lives to set up a plan each year. Getting it done allows you to go back to thinking about other things, and you can feel relieved that things might be a little easier for your family when you pass.
Eric Parker is a partner at Stotis & Baird Chartered law firm in Chicago, where he practices Estate Planning, Probate, Elder Law, Guardianship and Litigation. Check out our other articles on estate planning linked below.
Need to create your will? Stotis and Baird can help. Contact us to see how we can help you protect your estate.