Why You Need a Will
A will is a legal document designating the transfer of your property and assets after you die. Although creating a will is not a difficult process, about half of all Americans die without one. If you die without a will, or intestate, the court steps in and distributes your property according to the laws of your state, which may or may not coincide with your wishes. If you have no apparent heirs and die without a will, it’s even possible the state will claim your estate. Remember, wills are not just for the rich; your will ensures that whatever your assets, they will go to family members or other beneficiaries you designate.
Probate is not a problem…it is a solution. Learn more…
Probate is a legal term, which means to “prove” a will. During probate, the court determines that your signed will is a genuine statement of how you want your estate to be distributed. Depending upon the state in which you reside, the probate process may take a few days or it may take many months, and depending upon the complexity of the will, it can be an expensive process. Careful planning can help stream line or avoid the probate process. For example, life insurance does not have to go through probate and can be disbursed directly to your beneficiaries. A qualified financial planner or estate attorney can help you determine what’s appropriate for your specific situation.
Each state has specific requirements, but in general, a will can be written by any person over the age of 18 who is mentally capable – commonly stated as “being of sound mind and memory.” Although it may seem like something you can do yourself, it may be best to consult an attorney for help when creating a will, especially if:
* You expect to owe estate tax at your death
* You foresee any disagreement among your heirs or beneficiaries.
* You have children from more than one marriage, or a blended family.
* You own property in another state.
* You want to establish a trust
To be valid, a will must comply with the laws of the state in which you live. Only about half the states recognize “homemade” wills. State law may stipulate that you use specific language, sign the will in a particular way, and/or have a certain number of witnesses of a certain age present when you sign.
Bear in mind that having a will is especially important if you have young children because it gives you the opportunity to designate a guardian for them in the event of your death. Without a will, the court will appoint a guardian.
Elements of a Will
Basic elements of a will include:
* Your name and place of residence.
* A brief description of your assets.
* Names of spouse, children, and other beneficiaries, such as charities or friends.
* Alternate beneficiaries, in the event a beneficiary dies before you do.
* Specific gifts, such as an auto, residence, or family heirlooms.
* Establishment of trusts, if desired.
* Cancellation of debts owed to you, if desired.
* Name of an executor to manage the estate.
* Name of a guardian for any minor children.
* Name of an alternative guardian, in the event your first choice is unable or unwilling to act.
* Your signature.
* Witnesses’ signatures.
Probably the most important considerations when making your will are naming a guardian for your minor children and naming an executor.
Naming a Guardian
If you die while your children are still minors or you have children who cannot care for themselves in adulthood, you’ll want them to have the best possible care in your absence. Making a will gives you the opportunity to select the person you believe can provide that care. The guardian you choose should be over 18. Before naming a guardian, talk to the person you’d like to name to make sure they are willing to assume the responsibility. Name an alternate guardian as well, who can take over if the primary guardianis unable or unwilling to fulfill the responsibility. This is especially important if your children are young or will require life-long care. If you do not name a guardian to care for your children, a judge will appoint one, and it may not be someone you would have chosen.
Although it is legal to name a couple as co-guardians, it may not be advisable. It’s possible the couple may choose to go their separate ways at some later date, and, if so, a custody battle could ensue.
Naming an Executor
The person who carries out or executes the instructions in a will is called an executor. Obviously, your executor should be an individual you trust. Most people choose their spouse, an adult child, a relative, a friend, or a trust company or attorney to fulfill this duty. Choose someone who can handle all of the financial matters involved with settling your estate, and check with that person ahead of time to make sure they are willing to assume the responsibility. Some states stipulate that the executor must be a state resident. It’s a good idea to appoint an alternate executor in case the first person you name is unable or unwilling to fulfill the responsibility. The responsibilities of an executor generally include:
* Collecting your assets.
* Paying creditors.
* Paying taxes.
* Notifying Social Security and other agencies and companies of the death.
* Canceling credit cards, magazine subscriptions.
* Distributing assets according to the will.
While you can specify in your will that an executor waive payment in order to be eligible to serve as executor, this is only suitable if the person named is a beneficiary of the estate or a very close personal friend, since being an executor is time consuming. You should expect your estate to pay an independent executor for this service. Banks or trust companies will not serve as executors of estates unless entitled to payment. If no executor is named in a will, a probate judge will appoint one, most often a bank or an attorney. This will likely increase the cost.
Put It in Writing
An inventory of your assets is a good start, but it’s not the only information you need to create a will. You also need a list of family members and other beneficiaries (e.g.,charities) that you may mention in your will, an estimate of your outstanding debts, and an outline of your objectives (e.g., to provide college tuition for my grandchildren). Use this information to consider how you want to distribute your assets.
Ask yourself lots of questions: Is it important to pass my property to my heirs in the most tax-efficient manner? How much money will my grand child need for college? Do I need to provide for a child who has a disability? An attorney familiar with estate planning will help you identify the questions and guide you in determining the answers.
Specific bequests are those in which you name a specific beneficiary to receive a specific sum of money or a specific item or property (e.g., $10,000; my furnished residence at 10 Elm St.; my entire coin collection). Specific bequests may also be made to charities, although the tax consequences of the two maybe different.
Be as specific as possible when naming beneficiaries. For example, state the person’s full name as well as his or her relationship to you (child, cousin, friend) so your executor will know your intentions. Clarity will help to prevent challenges to your will.
Items not specifically mentioned need to be addressed in a catch all clause of your will called a residuary clause, which generally states, “I give the remainder of my estate to.. .” Without this clause, items not specifically mentioned will likely be distributed in accordance with state law.
Note that the estate usually pays outstanding debts before beneficiaries receive their shares. You may want to clear up debts that you think maybe a problem, or make specific provisions for payment of those debts in your will.
States require that you sign the will in front of witnesses; the numberof witnesses varies by state. Witnesses should not be beneficiaries of the will, and only one copy should be signed.
The above information is an excerpt from an article entitled Life Advice About….Estate Planning published by the Federal Citizen Information Center. The full article can be found here.