The Simplest Way to ensure that your funds, property and personal effects will be distributed after your death according to your wishes is to prepare a will. A will is a legal document designating the transfer of your property and assets after you die. Usually, wills can be written by any person over the age of 18 who is mentally capable, commonly stated as “being of sound mind and memory.” Your state may impose additional requirements.
Everyone Needs a Will: Although wills are simple to create, about half of all Americans die without one (or intestate).
Without a will to indicate your wishes, the court steps in and distributes your property according to the laws of your state. Wills are not just for the rich; the amount of property you have is irrelevant. A will ensures that what assets you do have will be given to family members or other beneficiaries you designate. If you have no apparent heirs and die without a will, it’s even possible the state may claim your estate. 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 for your children.
Elements of a Will Basic elements of a Will generally included in a will:
- 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 or residence
- 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 minor children
- Name of an alternative guardian, in the event y our first choice is unable or unwilling to act
- Your signature
- Witnesses’ signatures
- Two of the most important items included in your will are naming a guardian for minor children and naming an executor.
Naming a Guardian In most cases, a surviving parent assumes the role of sole guardian. However, it’s important to name a guardian for minor children in your will in case neither you nor your spouse is able and willing to act. The guardian you choose should be over 18 and willing to assume the responsibility. Talk to the person ahead of time about what you are asking. You can name a couple as co-guardians, but that may not be advisable. It’s always possible the guardians may choose to go their separate ways at some later date, and, if so, a custody battle could ensue. 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.
Naming an Executor An executor is the person who oversees the distribution of your assets in accordance with your will. Most people choose their spouse, an adult child, a relative, a friend, a trust company or an attorney to fulfill this duty. You should expect your estate to pay an independent executor for this service. If no executor is named in a will, a probate judge will appoint one.
Preparing a Will Start by organizing what you need:
- outline your objectives
- inventory your assets
- estimate your outstanding debts
- prepare a list of family members and other beneficiaries.
Use this information to carefully 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?
- Do I need to establish a trust to provide for my spouse or other beneficiaries?
- How much money will my grandchild need for college?
- Do I need to provide for a child who has a disability?
Taking inventory of the assets may be the key to making a will. Assets should be mentioned in your will. Any items not specifically mentioned may be addressed in a catchall 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 be distributed in accordance with state law.
Outstanding debts usually will be paid by your estate before your beneficiaries receive their shares. You may want to clear up debts that you know will be a problem, or make specific provisions for payment of those debts in your will. Remember to be specific and clear when naming beneficiaries. For example, state the person’s full name as well as his or her relationship to you (child, cousin, friend, etc.) so your executor will know exactly who you mean. Clarity will also help to prevent challenges to your will.
States require that you sign the will in front of witnesses. The number of witnesses varies by state. A witness should not be a beneficiary under the will. Only one copy of your will should be signed.
Remember Your Favorite Charities in your Will!
If you share your estate with charity, it will cut your estate tax bill. Leave your entire estate to charity, and you’ll owe no estate taxes at all!
Charitable gifts are not taxed as long as the contribution is made to an organization that operates for religious, charitable or educational purposes.
Updating a Will You’ll probably need to update your will several times during the course of your life. For example, a change in marital status, the birth of a child or a move to a new state should all prompt a review of your will. You can update your will by amending it by way of a codicil or by drawing up a new one.
Where to Keep Your Will Once your will is written, store it in a safe place that is accessible to others after your death. If you name a trust company as executor, it will hold your will in safekeeping. You can keep it in your safe deposit box, but be aware that some states will seal your safe deposit bax upon your death, so this may not always be the safest place to store your will. Make sure a close friend or relative knows where to find your will. If you had an attorney prepare your will, have him or her retain a copy with a note stating where the original can be found.
