If you care about what happens to your money, home, and other property after you die, you need to do some estate planning. There are many tools you can use to achieve your estate planning goals, but a will is probably the most vital. Even if you’re young or your estate is modest, you should always have a legally valid and up-to-date will. This is especially important if you have minor children because, in many states, your will is the only legal way you can name a guardian for them. Although a will doesn’t have to be drafted by an attorney to be valid, seeking an attorney’s help can ensure that your will accomplishes what you intend.
Wills avoid intestacy
Probably the greatest advantage of a will is
that it allows you to avoid intestacy. That is, with a will you get to
choose who will get your property, rather than leave it up to state law.
State intestate succession laws, in effect, provide a will for you if
you die without one. This “intestate’s will” distributes your property,
in general terms, to your closest blood relatives in proportions
dictated by law. However, the state’s distribution may not be what you
would have wanted. Intestacy also has other disadvantages, which include
the possibility that your estate will owe more taxes than it would if
you had created a valid will.
Wills distribute property according to your wishes
Wills allow you to leave bequests (gifts) to
anyone you want. You can leave your property to a surviving spouse, a
child, other relatives, friends, a trust, a charity, or anyone you
choose. There are some limits, however, on how you can distribute
property using a will. For instance, your spouse may have certain rights
with respect to your property, regardless of the provisions of your
Wills allow you to nominate a guardian for your minor children
Gifts through your will take the form of
specific bequests (e.g., an heirloom, jewelry, furniture, or cash),
general bequests (e.g., a percentage of your property), or a residuary
bequest of what’s left after your other gifts.
In many states, a will is your only means of
stating who you want to act as legal guardian for your minor children if
you die. You can name a personal guardian, who takes personal custody
of the children, and a property guardian, who manages the children’s
assets. This can be the same person or different people. The probate
court has final approval, but courts will usually approve your choice of
guardian unless there are compelling reasons not to.
Wills allow you to nominate an executor
A will allows you to designate a person as your
executor to act as your legal representative after your death. An
executor carries out many estate settlement tasks, including locating
your will, collecting your assets, paying legitimate creditor claims,
paying any taxes owed by your estate, and distributing any remaining
assets to your beneficiaries. Like naming a guardian, the probate court
has final approval but will usually approve whomever you nominate.
Wills specify how to pay estate taxes and other expenses
The way in which estate taxes and other expenses
are divided among your heirs is generally determined by state law
unless you direct otherwise in your will. To ensure that the specific
bequests you make to your beneficiaries are not reduced by taxes and
other expenses, you can provide in your will that these costs be paid
from your residuary estate. Or, you can specify which assets should be
used or sold to pay these costs.
Wills can create a testamentary trust
You can create a trust in your will, known as a
testamentary trust, that comes into being when your will is probated.
Your will sets out the terms of the trust, such as who the trustee is,
who the beneficiaries are, how the trust is funded, how the
distributions should be made, and when the trust terminates. This can be
especially important if you have a spouse or minor children who are
unable to manage assets or property themselves.
Wills can fund a living trust
A living trust is a trust that you create during
your lifetime. If you have a living trust, your will can transfer any
assets that were not transferred to the trust while you were alive. This
is known as a pourover will because the will “pours over” your estate
to your living trust.
Wills can help minimize taxes
Your will gives you the chance to minimize taxes
and other costs. For instance, if you draft a will that leaves your
entire estate to your U.S. citizen spouse, none of your property will be
taxable when you die (if your spouse survives you) because it is fully
deductible under the unlimited marital deduction. However, if your
estate is distributed according to intestacy rules, a portion of the
property may be subject to estate taxes if it is distributed to heirs
other than your U.S. citizen spouse.
Assets disposed of through a will are subject to probate
Probate is the court-supervised process of
administering and proving a will. Probate can be expensive and time
consuming, and probate records are available to the public. Several
factors can affect the length of probate, including the size and
complexity of the estate, challenges to the will or its provisions,
creditor claims against the estate, state probate laws, the state court
system, and tax issues. Owning property in more than one state can
result in multiple probate proceedings. This is known as ancillary
probate. Generally, real estate is probated in the state in which it is
located, and personal property is probated in the state in which you are
domiciled (i.e., reside) at the time of your death.
Will provisions can be challenged in court
Although it doesn’t happen often, the validity
of your will can be challenged, usually by an unhappy beneficiary or a
disinherited heir. Some common claims include:
- You lacked testamentary capacity when you signed the will
- You were unduly influenced by another individual when you drew up the will
- The will was forged or was otherwise improperly executed
- The will was revoked
How We Can Help
If you have been appointed as trustee of an estate, we can help you satisfy your fiduciary responsibilities through education and delegation of some of your duties. This will help protect you from a liability standpoint as you manage and distribute the estate.
Original article prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.