If one is married, the first question which arises in a small estate is whether each spouse needs a will to pass the estate in an outright manner to the survivor.
If either spouse dies without a will, that portion of such spouse’s estate which is not held in joint tenancy or is not payable by contract, such as a life insurance policy, will be disposed of under the laws of intestacy (which are the rules made by the state legislature). In common law states, the laws of intestacy require that a portion of the estate go to the children, even if one spouse survives. However, the law of intestacy California (which is a community property state and does not recognize common law marriage), community property devolves entirely (i.e., the one-half belonging to the decedent is transferred) to the surviving spouse (Cal. Prob. Code § 6401(a)). Alternatively, the portion of the decedent spouse’s separate property will pass to their children (Cal. Prob. Code § 6401(c)). Therefore, in many instances, unless there is a will, the entire estate will not be transferred to the surviving spouse.
Even if the entire estate under the laws of intestacy passes as intended to the surviving spouse, there are impactful matters that person’s leaving a will can control. First, under a will, the estate owner may name the persons or entities of his or her choice to act in a fiduciary capacity after the owner’s death, such as the executor of the estate. Second, the will may waive a bond for fiduciaries appointed under the will if the estate owner so wishes. Probate judges, especially in San Bernardino, love to order bonds so a provision waiving bond is not a dispositive, but it certainly can help.
In the absence of a will, an administrator will be appointed by the court and a bond may be required, even if the administrator is a close relative or a major beneficiary of the estate. The bond premium, which is typically borne by the estate, may often be expensive in relation to the size of a small estate and is often difficult to terminate once the estate administration is completed. Finally, if the decedent has minor children, a will can appoint a guardian of the person or property of their minor child in the event that the surviving spouse is deceased or unable to care for such child. Moreover, since minor children cannot inherit property directly in most jurisdictions, a will can also establish a trust for an estate owner’s minor children or permit the personal representative of an estate to establish a custodial account for any minor children.
Finally, it may be theoretically possible for the couple to leave their estate to the surviving spouse without the necessity of each having a will. Alternatives to a will include holding title in property in joint tenancy, designated a beneficiary on death (when available i.e. annuity, bank account, life insurance), or funding a revocable trust.
By holding title to their assets in joint tenancy with a right of survivorship or via beneficiary designations, the assets will pass to the surviving spouse on the death of either of them by operation of law rather than under the laws of intestacy or via a will. In a small estate, most assets can be placed in joint tenancy without serious tax consequences.
In the case of an insurance policy or a retirement account, naming the spouse as the beneficiary will cause the proceeds be paid to such spouse pursuant to the insurance contract or rolled over to the survivor’s retirement account without reference to a will.
If the assets are placed in a living trust, the trust may also leave the estate to the surviving spouse without the necessity of a will Even though a will or trust may not be required to transfer an estate to the estate owner’s surviving spouse, the estate plan would be incomplete without one. If both spouses should die together, or, on the death of the survivor, without a will or trust there are no provisions to direct the distribution of the estate. To make sure an estate is distributed according to the wishes of the decedent, a will or other dispositive testamentary instrument, such as a living trust, is required. Moreover, even in a situation where the bulk of an estate owner’s assets are held in joint tenancy with a right of survivorship or are properly titled in a living trust, a complete estate plan will include a will nonetheless to dispose of any overlooked or abandoned assets.