Wills
All of us have seen the TV ads featuring a lawyer-looking actor promoting a "Do-it-Yourself" will kit (I will talk about these kits below). The ad always insinuates that if you die without a will, your property will be in jeopardy of being confiscated by the state. This is less than half-right. Only in the rarest of circumstances will the state obtain the wealth of a dead person. Every state in the country has a law called the intestate statute. If you die intestate (that is, you die without a will), the intestate statute of your state kicks in. What happens is that the dead person's property is left to his or her family under a "best guess" scenario. For example, if you die without a will and leave a surviving spouse but no children, your spouse will inherit all of your property. If you die leaving a surviving spouse and children, typically the surviving spouse will get one-third of your property and the children will divide up the balance of your wealth. If you die without a will and have no spouse, children, or grandchildren, the state law will then provide that your estate goes to your parents, siblings, etc.
So intestate succession laws assure that someone in your immediate family will succeed to your wealth if you die without a will. Where the TV ads are correct is that you lose the ability to direct where your wealth will specifically go. Another point that is of great importance to parents with minor children is that a will provides the vehicle to name the guardian of your minor children in the event that both parents are dead.
So it does make a great deal of sense for both you and your spouse to have a simple will to address these concerns. A simple will between spouses is commonly referred to as a "Mom and Pop" will. My wife and I each have one of these simple wills and I will use my own family's situation as an example. My wife and I can cover our needs with these simple wills because in our current economic state, we are not subject to the federal estate tax (I will comment on federal estate taxation below) and otherwise (like most people) do not have a complicated estate to deal with.
Under Debbie's and my will, we attend to simple but very important hypotheticals. If I die and Debbie survives me, all of the wealth in my probate estate (I will define a probate estate below) is left outright to my wife. Also, my will provides for an executor. An executor is the person in charge of wrapping up my estate. My will states that if my wife has not predeceased me, she will be the executor of my estate.
Lastly, my will addresses what will happen in the event that my wife has predeceased me. First, it provides for the equal division of my estate between my children. Next, it specifically names a person who would act as executor of my estate in the event my wife is dead. Lastly, my will names a guardian for our minor kids (a person my wife and I have previously agreed upon and talked to about this role) who would have legal authority to raise the kids. My wife's will is the mirror image of mine, with me receiving her estate and being the executor of her estate in the event that she predeceases me.
How about buying your own cheap "Do-it-Yourself" will kit rather than having a lawyer prepare your will? If this is all you truly can afford, it is better than not having any will at all. However, I am strongly advising you to seek out an appropriate lawyer (I will tell you how in a moment) to prepare your will rather than doing it yourself. Why? Aren't lawyers just a bunch of exploitive crooks?
For the sake of full disclosure, if you have not already noted, among my various professional degrees and certifications I hold two law degrees and am a practicing lawyer. However, please believe the advice I am giving you on retaining the assistance of a lawyer. Although I do generally share the public anger against trial lawyers, the availability of competent, well-trained lawyers is a necessity in any orderly society, particularly ours. Although lawyers may appear to be exploitive and overpriced, generally they are honest, highly trained, intelligent professionals who are well worth the expense.
Even for something as relatively simple as a Mom and Pop will, a lawyer should be retained. In the process of preparing the will, the lawyer will frequently ascertain other legal problems that are highly relevant to the succession of your wealth. For example, a good lawyer will determine that the beneficiary designations on your retirement plans and insurance policies are current and name the proper beneficiary. I have seen and heard of many situations where a deceased parent or an ex-spouse is still the named beneficiary on retirement plans and insurance policies. Also, a lawyer should be consulted to implement the probate-avoiding strategies discussed below. All of this (and the peace of mind that will go with it) are well worth the legal expense it will cost you.