Willful Omission

IT'S BAD ENOUGH WHEN A LOVED one dies, and it will get even worse if the person died without a will. Dying intestate leaves heirs with a bundle of legal, administrative and tax headaches. And even if you get an inheritance, there might be little you can do about crushing tax consequences. Beyond
these practical problems, if husband and wife die together without wills, the decision of who will raise minor children is left to the court--not as you might have wished.

These nightmares notwithstanding, more than half of American adults die without a will. They have ranged from presidents, including Abraham Lincoln and Ulysses S. Grant, to businessmen, like Howard Hughes, who died leaving $2
billion, no valid will and a 15-year legal tussle.

Why do so many otherwise thoughtful people fail to plan their estate?
Procrastination. Thoughtlessness. Or maybe just fear of mortality. "You'd be shocked that many people think doing a will hastens their death," says William Zabel, of Schulte Roth & Zabel.

If a close relative has recently passed on with no clear will, here's what to do: First, after hiring a lawyer, make absolutely sure there really isn't a will. Whoever files letters of administration will need to swear that a complete search has been conducted. Immediately call all lawyers, business
associates, accountants, even acquaintances of your loved one. Obtain permission from the probate court to search safe deposit boxes, personal belongings, even the house. "People often hide their will in very strange places," says estate lawyer Judith Siegel-Baum.

When William Gottlieb, a Manhattan real estate owner, died in October, his sister at first found no will and paid some bills out of her own pocket. A few weeks later, as she and a brother were dividing Gottlieb's estate, she found a 1972 will stashed in his belongings--which left her all of his money.

State law usually determines who will administer the estate--the closest relative, starting with the spouse, is first in line. Although administrators usually get paid a percentage of the estate, it can be a lot of work--managing and locating assets, paying bills, filing income taxes. To avoid fights heirs should consider naming a neutral party, like a friend or lawyer, as administrator.

When it comes to who gets the inheritance, the pecking order in most states is similar: The spouse comes first, followed by children. After that, the next in line are parents, brothers and sisters, grandchildren and then out to first cousins. Any of the recipients, of course, could be a relative you detest or barely know. When there's no family, the government grabs the
estate.

The way states mandate the division of intestate estates is not especially tax-friendly. The surviving spouse usually gets the majority of the estate, but the kids get a big chunk as well. This is great for the tax collector, because distributions to spouses are exempt from federal tax and local tax
too, in most states, but the children will get clobbered if their combined share exceeds $650,000 in 1999. With a will you could name your spouse as the main beneficiary, avoiding any tax bite.

Moreover, when a large estate goes to a young child the court may decide a guardian is needed to watch over the money. And even if the surviving parent is named guardian, the parent would have to get court approval for major expenditures--a legally expensive and time-consuming process.

In a case involving children who have lost both parents, be aware that there's no pecking order for guardianship. Though a close relative usually becomes the guardian, the court determines what is in "the best interest of the child." That could start a battle among relatives, worsening an already
tragic situation.

This article was reprinted from an article by Adrienne Sanders in Forbes Magazine, December 27, 1999 and was provided to us by: Mark Writer of Prepaid Legal Services

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