|
The Simplest Way
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 One
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
Here are the basic elements 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.
Probate refers to the legal procedure for the orderly distribution of
property in a person's estate. The executor files the will in probate
court, where a judge decides if the will is valid. If it is found to be
valid, assets are distributed according to the will. If the will is found
to be invalid, assets are distributed in accordance with state laws.
Responsibilities usually undertaken by an executor include:
- Paying valid creditors
- Paying taxes
- Notifying Social Security and other agencies and companies of the
death
- Canceling credit cards, magazine subscriptions, etc.
- Distributing assets according to the will
Preparing a Will
Start by organizing what you need: outline your objectives, inventory
your assets, estimate your outstanding debts and 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 should be signed.
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. Generally, people choose to issue a new will that supersedes
the old document. Be sure to sign the new will and have it witnessed,
then destroy the old one.
Estate Taxes
The property included in your will may be subject to taxation. In planning
your will, take into account the following:
- Federal estate taxes will generally be due if the net taxable estate
is worth more than $1,000,000. This amount is scheduled to gradually
increase from $1,000,000 in 2002 to $3,500,000 in 2009 so that it will
eventually shield $3,500,000 in gift or estate transfers from tax per
taxpayer. Estates in excess of the exempt amount can be taxed at a rate
from 37% to 50% (the top percentage is scheduled to gradually decrease
to 45% in 2009).
- Also, note that these estate tax changes are scheduled to be repealed
in 2010. If not extended, the tax law will revert to the estate and
gift tax provisions in affect 2001. Consult a tax or financial professional
to determine a plan that is right for you and your family.
- State death or inheritance taxes
- Federal income taxes
- State income taxes
- You may be able to minimize your estate tax by establishing a trust
or giving gifts during your lifetime. You can also cover the cost of
estate taxes by purchasing a life insurance policy intended to pay taxes.
Talk to your lawyer and life insurance agent to find out more about
how this works.
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.
A Living Will
A living will is not a part of your will. It is a separate document that
lets your family members know what type of care you do or don't want to
receive should you become terminally ill or permanently unconscious. It
becomes effective only when you cannot express your wishes yourself. If
your state recognizes a power of attorney for health care, have one executed
to authorize someone to act in accordance with your present intentions.
Discuss your wishes as reflected in your living will with family members,
and be sure they have a signed copy.
Plan Ahead
The end of your life is something you probably don't want to dwell on,
but thinking about what will happen to your loved ones and your assets
and personal possessions is important. Making sure you've done all you
can to make their lives easier will give you peace of mind. And once your
will is drafted, you won't have to think about it again unless something
significant in your life changes.
For More Information
Other reference materials
The American Bar Association Guide to Will and Estates
Call 1-800-793-2665 to order and mention reference number 032-03.
Two publications from Nolo:
Nolo's Will Book
Plan Your Estate
Call 1-800-728-3555.
PAMPHLETS FROM THE FEDERAL GOVERNMENT
The quarterly Consumer Information Center Catalog lists more than 200
helpful federal publications. For your free copy write:
Consumer Information Catalog,
Pueblo, CO 81009, call 1-888-8-PUEBLO (1-888/878-3256) or
find the catalog on the Internet (www.pueblo.gsa.gov).
This Life Advice content about Making A Will was produced by the
MetLife Consumer Education Center and reviewed by the Division for Public
Education of the American Bar Association and the Legal Services Corporation.
Source: Consumer Information Center, Pueblo Colorado
|
