The Basics of Estate Planning – Wills

Did you know that approximately 60% of American adults do not have a written estate plan? This article focuses on a common estate planning tool: a will or last will and testament, and the pros and cons of having one.

What is a will?

A will is a legal document that contains your written instructions on how your property/assets will be distributed and how your dependents will be cared for in your absence. Your assets may consist of bank accounts, brokerage funds, vehicles, real estate, items of sentimental value, and other personal property.

In a will-based estate plan, your last will and testament will cover four important points:

1. Who will act as your Personal Representative/Executor;
2. What powers will your Personal Representative/Executor have;
3. Who will be your beneficiaries (those who will inherit your property); Y
4. How your property will be transferred to your beneficiaries.

If you have minor children, your Last Will and Testament will also cover who acts as guardian of your children. There are several types of wills, including the following:

Self Proving Will / Probate

A trial will, also known as a will, is the traditional type of will that most people are familiar with. It is a formally prepared document that is signed in the presence of witnesses.

holographic testament

A holographic will is one that is written by hand, not typed or created on a computer or word processor and without the presence of witnesses. These wills are only valid in certain states. Maryland and the District of Columbia do not recognize holographic wills.

oral testament

Oral wills are oral wills made before witnesses. These are not widely recognized by the courts due to the high potential for fraud, misunderstanding, or error.

What are the legal requirements?

A will is valid if:

• the Will Maker is eighteen years old;
• the will is in writing;
• the will is signed by the executor; Y
• the will is witnessed and signed by at least two people in the presence of the executor.

What are the advantages and disadvantages of wills?

Potential Benefits

1. A will is good for individuals and families who do not have assets that would have to go through the brief process called probate, or who are not interested in avoiding probate.
2. A will is traditionally less expensive to prepare than a trust-based estate plan.
3. A will allows you to supplement a guardian to care for your minor children until they become adults.

Possible disadvantages

1. A will may not provide enough tax planning, leaving your estate and/or beneficiaries to pay hefty state and federal estate taxes.
2. A will may not sufficiently protect your assets from creditors.
3. A will must go through probate, which can take anywhere from a few months to a couple of years; very expensive; and complex. The estate also lacks privacy, which means your estate plan will become part of the public court records that anyone can read, including your last will and testament, a list of your beneficiaries and assets, and a breakdown of who receive what, how and when. Get it.
4. A will by itself does not make any provisions in the event that you become incapacitated.
5. A will generally addresses the distribution of most of your assets, however, there are some assets that are not covered by the instructions in your will, such as community property, life insurance payments, retirement assets, investment accounts that are designated as “transfer on death,” and assets owned jointly by two or more persons in which the survivor automatically acquires ownership (co-owners with right of survivorship).

Don’t let the long list of potential drawbacks to wills discourage you from planning your estate. All of the potential drawbacks listed above can be addressed with other estate planning tools.

How can I change or revoke my will?

You can always revoke or change your will before you die. You can change your will by executing a new will or by adding an addendum called a “Codicil”. Written changes, such as additions, deletions, comments, or markings, to the will itself can invalidate it. Therefore, once signed, a will should not be altered in any way without the assistance of an estate planning attorney.

What should I consider when making a will?

• Who should receive my property? In what proportions? If there are children, at what age(s)? If a person you want to name to receive a portion of your estate dies before you, who should receive that portion?
• Who should be appointed guardian of my minor children? If you have minor children, you should also consider a Child Protection Plan that will appoint temporary and permanent guardians for your children.
• Should a trust be created in my will for my spouse, children, or others?
• Should insurance proceeds be paid to a Trustee named in my will? Wife? Kids?
• Who should I name as a personal representative? Successor Personal Representative?
• Do I expect to inherit assets from one of my parents or others, thereby increasing the size of my estate and creating the need for more careful planning?
• Can I reduce or avoid estate taxes?

I hope this information has helped you better understand wills and how they fit into the estate planning process. As always, if you have any questions about any aspect of estate planning, I invite you to contact me by phone (888) 495-7289 or visit our website or blog.