Some of our Michigan readers may have trouble thinking of this figure: $5.25 million. When it comes to estate planning, however, this is actually a very important figure. $5.25 million is the limit of the federal estate tax exemption. What does that mean? It means that if the total value of an estate is below that threshold it will not be subject to taxation at the federal level. For many people, this will never be a concern because there is no way they would ever earn that sort of money, short of winning the lottery. Unfortunately, this type of thinking also sometimes leads people to think that they do not even need a will, let alone a comprehensive estate plan. In reality, however, this is far from the truth.
A recent article detailed some of the common, every day reasons why a person needs to have a will, even if they don't consider themselves to be well-off or anticipate receiving any type of significant inheritance in the future. The first reason can kind of seem to take a libertarian slant: who do you want to determine what happens to your assets, even if they are limited to you or the government? A will lets a person specifically lay out a plan to designate property distribution. When a person dies without a will, known as dying intestate, state laws will dictate who will receive that person's assets usually relatives in order of familial relationship: spouses and children first, parents, siblings, etc.
What if a person isn't worried about their personal property because the most important thing in their life is their minor children? Well, a will allows parents to designate the guardians of their choice in the unfortunate event that both parents die while the children are still minors.
These are just two examples of how having a will drafted can be the right thing regardless of the value of an estate. There will be other reasons for other people, depending on their individual circumstances. However, most people probably see the value in at least having their wishes written out in a formal document, to be ready for use when the time comes.
Source: MarketWatch, "Estate planning for the rest of us," Bill Bischoff, May 21, 2013