A properly written will can be an important first step in the estate planning process. Learn some of the “dos and don’ts.”
Along with death and taxes, there seems to be a third certainty for Americans: a reluctance to think about, talk about, and properly and legally prepare for the inevitability of the first item.
Composing your will, which can be a first step in the estate planning process, may not be high on the list of conversation topics for family dinner—and recent research indicates a majority of Americans don’t have one. Just 44% of U.S. adults reported having a will, according to a May 2016 Gallup poll (conducted shortly after the death of the musician Prince, who reportedly died without having a will). That figure was down from 51% in 2005.
Whatever your profession or income, a properly written will should accomplish a number of important aims:
“Families can get tortured over estate controversies and inadequate planning,” says David J. Dietrich, chair of the American Bar Association’s Section of Real Property, Trust and Estate Law. “You don’t want to leave it to chance.”
Here are some of the “dos” and “don’ts” experts recommend when 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 does not govern the transfer of certain types of assets, known as “nonprobate property,” which includes real estate and retirement accounts.
Without specific instructions in a will, real estate and other assets owned with “rights of survivorship” pass automatically to the surviving owner, according to the American Bar Association. Often, real estate gets transferred to children equally as “tenants in common,” which has potential to open a can of worms, Dietrich says. If none of the children is designated “first option holder,” any of them could force a sale of the property, with the proceeds then divided among them. 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.
A will is a legal document with a list of instructions for disposing of your assets after your death. A will is enforced through probate court, which determines the validity of the will, pays any debts of the estate, and distributes the remaining assets to named beneficiaries.
If you die without a will, your state’s laws of descent and distribution determine who receives your property by default. These laws vary from state to state, but typically, the distribution would be to your spouse and children, or, if none, to other family members.
A will allows you to alter the state's default plan to suit your personal preferences. It also permits you to exercise control over many personal decisions that broad state default provisions cannot address.
Source: American Bar Association
If you have children under age 18 or any adult dependents, specify a guardian and/or trustee for them if you die and you were the last living parent. Also, if you’ve had more than one spouse, be sure to specify their role in the distribution of your assets.
A will must be signed and notarized in accordance with state law, and, if done correctly, should remain valid even if you’ve moved to a different state, Dietrich says. Still, it’s a good idea to ask your attorney or advisor, or educate yourself, on how inheritance taxes and other estate-related laws vary from state to state.
The 2016 Gallup poll indicated that the wealthier people are, the more likely they are to have a will. Of Americans whose annual household income is $75,000 or greater, 55% said they had a will, compared with 31% of those with incomes under $30,000, according to Gallup.
Money shouldn’t be an object. Nonprofit organizations are available in many states to help draft a will at little to no charge, according to AARP. Additionally, do-it-yourself 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.
Who gets your rare painting or baseball card? 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, he says. “A poorly written will might not address how to split up the tangible personal property, like art or collectibles.”
Enjoy yourself—but as the old song goes, remember it’s later than you think. If you don’t have a will, it’s probably time to get moving on it. There isn’t really an “ideal” age to write a will, Dietrich says, but if you’re in a committed relationship and considering having children (or you already do), a will is a good idea. Ultimately, you want to make your intents clear and legally binding, and help your family avoid disputes after you’re gone. And like a lot of things, good communication can go a long way.
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