Estate Planning: Introduction To Wills
A will is a document that describes how you want your property and owned interests distributed after your death.
Why You Need a Will
There are many reasons why you need a will. A will is especially crucial if you have young children and would like to make the decision of who will take care of them, both financially and physically, in the event of your death. You also need a will if you care who receives your property after you die. Whether make a will or not, you are making a choice. If you don't have a will, your choice is to allow your state to take care of making these decisions for you. If you do make a will, your choice is to make sure your loved ones are taken care of according to your wishes.
Requirements for a Valid Will
For a will to be considered valid, the following criteria must be met:
- The will has to be executed according to your state laws.
- You must be of sound mind at the time the will is prepared.
- You must understand the results of preparing your will.
- You must understand the nature and extent of the property you own.
- Generally you have to be at least 18 years of age, or the age of majority as defined under the laws of your state.
- The will has to be signed, dated and witnessed by the number of people required under the laws of your state.
- Some states require that your signature and those of your witnesses are notarized.
Valid Forms of Wills
There are three generally acceptable forms of wills. These are:
- Typewritten or Witnessed Will: This type of will is authorized in every state, and more often than not they are drafted by attorneys. They must satisfy the state's witness requirements; for instance, a state may require that the witness be at least a certain age and must be considered 'credible'.
- Holographic Will: This is a will that is completely handwritten, dated and signed by the person making the will, and is not witnessed. This type of will is legal in only some states, and it should be used as a last resort.
- Nuncupative Will: This is an oral will and is only allowed in a few states and under very limited circumstances. For instance, it may be considered valid only if the testator was unable to create a written will because of sudden illness that led to his or her death. An example that is often used is a soldier dying in combat. Nuncupative wills are usually limited to personal property, and state law may place a cap on the value of the property that it can cover.
Important Will Terminology You Should Know
One who has died leaving a testament or will. The testator must satisfy requirements as defined under state law. For instance, a state may require that the testator be considered to be of sound mind when the will is made, must not be an infant, must not have been under duress when the will was made and must not have been in a state where he or she was deprived of his or her free will when the will was made.
The executor is the party named by the testator to carry out the terms of the will, which includes settling outstanding debts and distributing the assets to the beneficiaries. (Read about the importance of this role in Choose The Right Executor.)
Bequest or Bequeath
Also sometimes referred to as a legacy, this is the act of giving personal property by will.
Person who has been named in a will or appointed by a judge to take care of minor children or a special-needs adult. Naming one person as the executor and another as the guardian can make sense in some cases if the guardian is not well equipped to handle financial matters. The court is not required to honor the guardian named in a will, but usually does unless there is evidence that the individual is incapable of handling the role. (Read Special Trusts For Special Needs for more information on how to ensure your loved ones with special needs are taken care of.)
This is what's left in the estate after all gifts are made and debts, taxes and other costs associated with the estate are paid.
Probate is the process used to make an orderly distribution of property from a decedent to a group of beneficiaries. The court essentially supervises the transfer of property, filing of claims against the estate by creditors and the publication of a last will and testament.
Assets subject to probate include the following:
- "Singly", or individually, owned assets.
- Property held by tenancy in common.
- Community property.
- Assets where the beneficiary is designated as the "estate of the insured".
- Property conveyed by deeds of title.
- Property held by joint tenancy with rights of survivorship (JTWROS).
- Government savings bonds.
- Payable-on-death accounts.
- Retirement accounts.
This is a second probate process for real estate located in a state other than that of the decedent's state of residence. This is necessary because a will can only dispose of the decedent's personal property located in the state of the decedent's residence.
Benefits of a Will
A will gives you the opportunity to make sure certain matters are handled in accordance with your wishes after your death. These include:
- Allowing you to choose in advance how you want your property to be distributed.
- Appointing a guardian for your minor children or other individual who requires guardianship.
- Choosing the executor of your estate.
- Designating a successor custodian in cases where you are serving in a custodial capacity for a minor or special-needs adult.
- Providing for individuals who would otherwise not have been eligible to receive property you leave behind.
What You Cannot Accomplish With a Will
Here are some things that a will cannot accomplish:
- Disinheriting a spouse. Spousal rights are protected in common-law states under spousal elective share statutes and in community-property states under community-property statutes.
- Transferring title to property held in JTWROS.
- Bequeathing all or most property to a charity when the decedent is survived by a spouse or children.
- Avoiding probate.
Dying Without a Will
If you die without a will, you are considered to have died intestate and the inheritance laws of the state in which you live will determine who gets your property. These laws vary among states.
There are many disadvantages to dying without a will, including:
- You do not get to decide how your property is disposed of.
- A judge may decide who will be the guardian of your children if their other parent or legal guardian does not survive you.
- It may cost your heirs time and money by having to go through a lengthy probate process. This includes legal fees and court costs.
- If you are in a non-traditional family situation, such as a same-sex or common-law marriage, it is possible that your partner will not be considered to be your family by the state and will be disinherited.
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