If you don't currently have a will, your loved ones may not receive the assets you wish to leave them in the event of your death. If you're unsure of where to start, read on for the basic information you need to know.
What Is a Will?
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children. To maximize the likelihood that your wishes are carried out, you want a will that is set forth in writing, and signed by you and your witnesses (see self-proving/testamentary will, below). If your will does not meet these standards, your instructions may not be carried out.
Not every form of will meets these standards. The varieties of wills include the following:
A self-proving will, also know as testamentary will, is the traditional type of will with which most people are familiar. It is a formally prepared document that is signed in the presence of witnesses.
Holographic wills are written without the presence of witnesses. They rarely hold up in court.
Oral wills are spoken testaments given before witnesses. They are not widely recognized from a legal perspective.
A living will has nothing to do with the distribution of assets, but rather sets forth your wishes for medical care in terms of life support should you be incapacitated.
Why Do I Need One?
Creating a will gives you sole discretion over the distribution of your assets. It lets you decide how your belongings, such as cars or family heirlooms, should be distributed. If you have a business or investments, your will can direct the smooth transition of those assets.
If you have minor children, a will lets you provide for their care. If you have children from a prior marriage, even if they are adults, your will can dictate the assets they receive. Creating a will also minimizes tensions among survivors. Relatives battling over your possessions can weaken what may have otherwise been a strong family.
If you are charitably inclined, a will lets you direct your assets to the charity of your choice. Likewise, if you wish to leave your assets to an institution or an organization, a will can see that your wishes are carried out.
What Doesn't It Cover?
While wills generally address the bulk of your assets, there are a variety of items that are not covered by the instructions in a will. These items include community property, proceeds from life-insurance policy payouts, retirement assets, assets owned as joint tenants with rights of survivorship, and investment accounts that are designated as "transfer on death."
What Happens If I Don't Have a Will?
If you do not have a will, you die intestate. In such a case, the state will oversee the distribution of your assets. Contrary to popular opinion, the state does not inherit your assets, but rather distributes them according to a set formula.
The formula often results in half of your estate going to your spouse and the other half going to your children. Such a scenario can result in the sale of the family home or other assets, negatively affecting the surviving spouse. This can create financial and emotional difficulties, particularly if your spouse was counting on the bulk of your assets to maintain his or her standard of living. Further complications can arise if your children are minors, as the court will appoint a representative to look after their interests.
Tax considerations are another important issue to consider, as a properly prepared will can minimize tax liability. This is particularly important to people with large estates. In the U.S., an estate tax return must be filed on estates valued at $5,450,000 or more (as of 2016); but no federal estate tax is due if the estate is worth less than that amount (See also: Estate Taxes: Who Pays What? And How Much?).
How Do I Get a Will?
When you are ready to prepare a will, compile a list of your assets and debts. Be sure to include the contents of safe deposit boxes, items of sentimental value, family heirlooms and other assets that you wish to transfer to a particular person or entity.
If your estate is substantial (ranging in the millions of dollars) or your situation is legally complex, you may wish to enlist an attorney. If so, be sure to work with someone who is familiar with your state's laws and has extensive experience writing wills. Your state bar association may be able to help you locate a suitable attorney.
If you are comfortable taking care of the task on your own, there are a number of software programs available to assist you, as well as a variety of websites.
How Can I Change My Will?
Changing your will is easy. Simply write a new will to replace the old one, or make an addition using an amendment known as a codicil. Ideally, you want to make any changes when you are of sound mind and in good health. This limits the likelihood that your wishes can be successfully challenged and avoids decisions made in haste or under intense emotional pressure.
What Do I Do with It Once It's Done?
Creating your will is the first step in a two-step process. The second step is putting your will in the hands of your executor or professional advisor. Remember, your wishes can only be carried out if they are known. Putting your will in capable hands ensures that it will be available when it is needed.
The Bottom Line
Making a will is a necessary – and, usually, fairly simple process – that can save your family time, money and grief, as well as give you peace of mind.