Advanced Estate Planning: Setting Up Your Will
By Steven Merkel
Your will is a rulebook for the distribution of your assets upon your death. Any person of sound mind and over your state's age of majority can draft his or her own will with or without the help of an attorney. A will can help avoid family disputes, identify specific assets and avoid the long and costly probate process. (For background reading, check out Why You Should Draft A Will.)
General Info and Revoking Previous Wills
The first page of your will should include your full name, Social Security number, and your state and county of residence. You should then include a statement that this is your most recent will and all other previous wills and codicils have been revoked.
Next, you'll provide information about your immediate family. Start out with your marital status and, if you are married, the full name of your spouse. You'll then need to list all of your children, your grandchildren and your parents, if they are still living. When listing these family members, provide as much information as possible, such as full name, address, telephone number, date of birth and Social Security number.
It is imperative that you list all of your children in your will, regardless of the fact that you might want to disinherit some of them. Several states have laws that protect the inheritance rights of children in the case that they might have been accidentally overlooked by the parents when making the will. Your acknowledgment of them in this section will support your executor's claim that they were taken into account when your will was drafted. If you wish to explain why a certain child was omitted from the will, it is best to describe this in a letter attached to the will rather than in the will itself.
Listing your grandchildren is equally important as well, because several states will allow the pass-through of an inheritance to the grandchildren if the original inheriting children are deceased at the time of your death. Should one of your children pass away and you forget to update your will, several states will direct the passing of that child's inheritance to the respective children of that child (or your grandchildren).
Care of Minor Children
What happens to your minor children in the event of your unexpected death? Ultimately, the decision of new custodianship is up to the family court. You can express your wishes for a successor custodian in your will by naming godparents for your children. However, naming godparents is no legal guarantee that the courts will appoint this custodian of your choice; it will simply guide the court with your wishes. The court will base its selection on the best interests of the child, which could be the closest responsible relative seeking guardianship.
Disposition of Property
In the disposition of your property, you'll have an opportunity to list your wishes for receive property such as real estate, vehicles, cash, jewelry, antiques, bank accounts, art, collectibles and other family heirlooms. You may want your whole estate to pass to one individual, to a trust, or to name multiple beneficiaries by way of specific bequests.
Be very specific here, making sure to include the complete name of the beneficiary, precise description of the item and location if in a private or hidden place. Be careful if you don't plan to leave at least half of your property to your spouse, as certain states have laws that could override your will to protect the surviving spouse. Do a little research to check on the specific laws of your state.
It's a good idea to consider the following two provisions in this section of your will:
1. Survivorship Requirement:
This requires all beneficiaries to survive you by 45 days to take property under your will. This is imposed so that your wishes are reflected in reality.
2. Residuary Beneficiary
This is a person who is named as a contingency plan for property not named or forgotten in the will, and most importantly, for property acquired after you've drafted your will.
Care of Pets
Since a will won't allow you to leave cash or property outright to a pet, you should leave your pet to someone that you trust will take on the responsibility of pet ownership. You can then leave money to that person directed for the care of your pet. Legally, this person is not bound by your will to care for your pet, but this should not be an issue if you discuss this with them and get their commitment for the future care of your pet.
Should you decide to name a caretaker for your pet in your will, you should take special note to cover all of the following areas pertaining to that pet in your will such as its health, medicine, diet, grooming, exercise and final arrangements. You should name a primary caretaker and an alternate caretaker and any money or property that you would like to leave to the caretaker for the benefit of the pet.
Personal Representative and Powers
While you're not required to name an executor in your will, it's a sensible thing to do so. If you don't, the probate court will name one on your behalf at your death. This person will normally be a relative. By specifically naming your own executor, you will identify the individual(s) responsible for collecting and distributing your property at your death; this person(s) will also be responsible for the payment of your debts and taxes.
If your executor is not a beneficiary named in your will, you may want to consider a provision in your will for the payment of an executor's fee, any percentage at 3% or less of the gross estate is a fair payment for this service. Or, simply naming a trusted relative or beneficiary named in the will as executor makes perfect sense, as they'll have an invested interest in the speedy settlement of the estate and most likely know the location of most of your documents. We'll talk more about your executor selection in a later chapter.
Payment of Debts and Taxes
This section affords you the ability to help direct your executor with clear instructions for the payment of your debts and taxes. You may want to leave particular instructions in your will that specify the forgiveness or collection of certain debts owed by specific individuals. Forgiveness of personal debts can leave that person with a sense of relief and let your executor and beneficiaries know your intentions to avoid future pursuit of the debt.
Inheritance taxes should be considered in your will, as your estate could be taxed at both the state and federal level, depending on the size of your estate and the estate tax laws relating to your state of residence. Here you have the opportunity to help direct your executor with the payment of potential estate taxes, possibly with life insurance proceeds, cash in a safe-deposit box, brokerage account assets, equal division among all beneficiaries, the sale of other specific assets or some other predetermined method.
If you wish to avoid a family dispute over the wishes in your will (and most people do!), it is always wise to leave at least every child and your spouse something in your will, no matter how large or small. State law will also interpret this as your consideration of that family member and typically not have any valid pursuit of the "overlooked child" provisions of the law.
Another helpful tip is to use protective language in your will to help discourage a dispute over the will such as a "no-contest provision." The wording of this declaration could look something like this: "Should any beneficiary under this will contest its provisions or any part of this will, this contesting beneficiary's share of the estate under this will shall be revoked and treated as if this beneficiary had not survived me, and their share shall be distributed equally to the other beneficiaries named within."
Finalization and Distribution
When your will is completed, make at least three copies for distribution. Only one copy will require your signature, the signatures of at least two witnesses, notarization and special attention to any other state-specific laws that confirm the legality of the document. The other copies should not be signed.
Along with your will, you should include the letter to your executor confirming his or her selection as your executor and a self-proving affidavit that gives the court an additional assurance that the will was made by you. If you desire to explain choices made in the will, attach a letter to the will instead of writing detailed descriptions within the will itself.
You should distribute copies of your will as follows: Your attorney, your executor, your safe-deposit box and a confidential place at home (such as a safe or locked filing cabinet). Only you or your executor should maintain the original signed copy of your will. Make sure all previous wills are destroyed. If the executor handles your signed will (and disposes of all previous wills), then you'll avoid the confusion of multiple wills and family battles. The original signed will should be in a place where your executor can find it immediately. Because it is difficult to get into someone else's safe-deposit box at a bank after death, the bank might not be the best place for your original will.
An insurance policy provision that allows the insurer to deduct ...
The individual who is the beneficiary of a trust or insurance ...
Insurance coverage provided to a policyholder that is considered ...
A test used to determine whether an insurance product can be ...
A test method used to determine whether a financial product can ...
A life or disability insurance policy that an insurance company ...
Learn the different types of contingent beneficiaries and what conditions must be met for these beneficiaries to receive ...
Learn more about the Rothschild fortune and the business operations that brought this family substantial success in finance ...
Learn what moral hazard is, the difference between ex-ante moral hazard and ex-post moral hazard and the behavioral changes ...
Learn what became of financier Bernard Baruch's multimillion dollar estate upon his death in 1965, and learn about his philanthropic ...