Are you ready to start estate planning and writing a will? Let's explore several dos and don'ts of the estate planning process.
When the topics of estate planning and writing a will come up, do you change the conversation? You’re not alone. Most people don’t like to think about their own deaths. In fact, only four out of ten U.S. adults have a will, according to a 2017 survey from Caring.com. However, it’s important to put your reluctance aside and write your will sooner rather than later. Without one, the state where you live will control who gets your hard-earned assets, and the outcome may not be what you intended.
“You don’t want to leave your estate to chance,” says David J. Dietrich, chair of the American Bar Association Section of Real Property, Trust and Estate Law. Just look at what’s happening with the estates of Prince and Aretha Franklin. Both died without a will. Now it’s up to the courts to determine the division of assets, which could take years and result in sizable attorney fees.
Here are some “dos" and “don’ts" to help you get started on writing a will.
Wills “do certain things very well,” says Dietrich, such as designate who’s in charge—an executor, trustee, or other representative. However, there are still possible gaps, and a will should be considered within the broader context of estate planning. A will doesn’t govern the transfer of certain types of assets, known as “nonprobate property,” which includes real estate and retirement accounts.
If you have children under age 18 or any adult dependents, be sure to designate a guardian and/or trustee to care for them after your death. Also, if you’ve had more than one spouse, you should specify their role in the distribution of your assets.
If you own real estate and other assets jointly with another person, the property generally passes automatically to that individual upon your death. It’s the property where you’re the sole owner that typically causes family tensions if you fail to provide specific instructions. For example, real estate often gets transferred to children equally, and they may have different ideas about what to do with it. Some might want to keep it. Others may want to sell it and split the proceeds. To avoid potential conflicts, it’s generally a good idea to specify how you want your house or any other real estate handled. One possible option is to grant one of the kids an option to buy out the others at fair market value.
Even well-intentioned, well-crafted wills can fall short if these accounts (and the beneficiaries) aren’t addressed. It’s “one of the biggest issues in American estate planning,” Dietrich says. “We’re talking about trillions of dollars.” A will should be drafted with thorough, complete disclosure of financial products, and the beneficiary designations. Consider logging in to your TD Ameritrade account to check if your beneficiary information is up to date.
Who gets your pets, rare paintings, or baseball card collection? Personal items that are difficult or impossible to divide up often trigger contentious estate disputes, Dietrich says. “It’s rarely the cash” that causes tension between heirs.
Inheritance taxes and other estate-related laws vary from state to state. So consider working with an attorney or other professional who’s familiar with your state’s requirements. If you move to another state, your will should still be valid, but you may want to double-check to be sure.
If you haven’t committed to writing a will, it’s probably time to get moving on it, especially if you’re in a committed relationship and have children (or are planning to have them). Ultimately, you want to make your intentions clear and legally binding to help avoid family disputes. Like a lot of things, good communication can go a long way.
The are a variety of estate-planning services. Look for one that fits your budget. Nonprofit organizations are available in many states to help draft a will at little to no charge, according to AARP. Additionally, do-it-yourself (DIY) online services have grown in recent years, although legal experts caution that such DIY options may not fully address a person’s needs. “If you want to avoid controversy, do it with a professional,” Dietrich says.
Once you write your will, you’ll be glad you did. With this document in place, you can feel confident your estate will be distributed on your terms. And you can shift your attention back to building your financial future. Review this estate planning checklist for additional ideas about how to make sure your wishes are carried out and your family is cared for after you’re gone.
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