Properly executed wills are the foundation of most solid estate plans because they designate how and to whom your property will be distributed after death. If you don't have a will, you give up your right to distribute your property as you wish. Assets owned jointly or that have beneficiary designations, such as life insurance, annuities, or retirement accounts, are not controlled by your will. However, they are included in your taxable estate.
Wills are Not Only For the Rich
Wills are not only for the rich. Wills are the primary documents for transferring wealth upon death. If you die without one, state law controls the disposition of your property. In addition, without a will, settling most estates can be more troublesome - and more costly - for beneficiaries.
Three Major Provisions That You Should Consider Including in a Will Are
1. Guardian for your children. A will should name a guardian for minor children in the event that both you and your spouse die. Selecting a guardian requires careful thought; be sure the person you elect is willing and able to accept this responsibility.
2. Creation of trusts. A will directs the disposition of your estate. To accomplish longer-term goals, such as funding a child's education or providing for an elderly parent, you may need to include instruction for the creation of trusts at your death.
3. Naming an Executor. Your executor is your personal representative after your death. He or she has several major responsibilities, including administering the estate and distributing assets to beneficiaries; making certain tax decisions; paying debts/expenses of your estate; ensuring all life insurance and retirement plan benefits are received; and filing necessary tax returns and paying the appropriate federal and state taxes.
People Often Think They Can Use a "Do-it-Yourself" Will
Estate, probate, and tax laws are complicated, and, in most cases, only a lawyer experienced in these areas knows how to use the legal terminology designed to protect you and your interests. You should work with your attorney to develop a will that can protect you effectively.
You Should Also Be Sure to Review Your Will Periodically. It May Need Revising If
1. You move to a different state
2. Your financial situation changes
3. You add another dependent, be it a child or aging parent
4. You make a change in your life insurance
5. Your heirs change marital status, have children, or die
6. Your guardianship plans change
7. You acquire property in another state
8. You inherit or purchase property
9. Your property increases substantially in value
10. There is a change in tax laws
Don't Write on Your Current Will
To change a current will, you must execute a new one or amend an existing one. Don't try to change your will by writing in or crossing out something. Changes made in this manner are meaningless, and may even void the entire will. See your lawyer to make any changes.
Why a Basic Will Isn't Enough
A will can be a good foundation for your estate plan because it outlines your wishes. It directs the disposition of personal belongings after you die and lets you designate a guardian for your younger children. But, a will does little - if anything - to address how taxes affect your estate. In fact, relying on a will as your sole estate-planning tool can cost you much more than peace of mind and money. For example, if you pass away with only a will in place: 1) Your financial accounts may be frozen 2) The probate process may be lengthy, with your assets and bequests subject to the claims of heirs and creditors 3) Probate and estate settlement costs may decrease the size of your estate 4) Your will is a public document 5) Interpretations of wills can vary from state to state. For example, your will may be interpreted differently if you die in a state other than where it was originated.
More Reasons Why a Basic Will is Not Enough
6. Your will may not control all your property (such as properties with joint tenancy titles and beneficiary designations).
7. Your will could be contested.
8. Assets left to your spouse are subject to federal estate tax upon his or her death (rates as high as 55%). Also, state inheritance or death taxes may apply.
9. Should you become incapacitated or incompetent, a will cannot make provisions for your care.
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