Estate Planning: Wills
Last Will and Testament
A will is a legal document, sometimes called a testament, which sets forth a person's wishes regarding distribution of property and the care of minor children upon their death. The person names one or more individuals to manage his or her estate at death. If a person doesn't have a will at the time of death, loved ones may not receive the assets you wish to leave them. By drafting a will, a person ensures that her belongings go to the desired beneficiaries. Note that some states may require probate, a review, for its validity. Having a will speeds up the court review process.
It is not a legal requirement to hire an attorney to draw up a will, although there are a few drawbacks in a homemade one written by the individual. The individual writing her will is not available to explain herself, or to correct any error in expression, when it comes into effect upon death. There is little room for error with wills created without the help of an estate planning attorney.
Types of Wills
Let's discuss the different types of wills.
The Self-Proving Will is most familiar to people. It's prepared, signed and witnessed. Whether a self-proving will is legal or not depends on the law of a person's state.
Most states allow self-proving wills with a few exceptions. In these states, the courts prove these wills: District of Columbia, Maryland, Ohio, and Vermont. The states that allow self-proving wills signed and witnessed are California and Indiana.
Holographic Wills are wills written and signed in the hand of the individual without witnesses. Fewer than half of all states recognize holographic wills and it is vulnerable to challenges in probate court.
The following states recognize holographic wills made within the state and witnessing requirements vary: Alaska, Arizona, Arkansas, California, Colorado, Idaho, Kentucky, Maine, Michigan, Mississippi, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming. These states do not recognize holographic wills made within the state: Connecticut, Hawaii, Oregon, South Carolina, Washington, and Wisconsin. Maryland and New York recognize holographic wills only if made by members of the Armed Forces. Indiana and Missouri have no statutes making references to holographic wills. States not listed do not recognize a holographic will in any instance.
Oral Wills tell someone aloud how you want your property distributed after you die. States that recognize them place restrictions on oral wills and must have at least two or three witnesses. They are not widely recognized legally and typically used by sailors or military personnel.
A few states (20 as of 2009), permit and recognize oral wills under certain circumstances; oral wills are for a person's "last sickness," and witnessed by at least three persons and reduced to writing by the witnesses within a specified amount of time after the person's death. Some states also place limits on the types and value of property bequeathed by an oral will. A few states only recognize oral wills made by military personnel on active duty.
Joint Wills are for two people. The two people are often married couples or civil partners. Each person can make identical wills leaving everything to the other person and outlines who inherits the estate after the second person dies. The survivor can change the will at any time.
Another type of joint wills is a mutual will that has two separate wills with identical provisions, similar to mirror wills. Each contains a promise that the survivor will not make changes later.
Pour over Wills
Pour over Wills place (selected) assets into a previously established trust.
Conditional Wills specify that its provisions are valid if a certain event happens or does not happen. A common example is the age of the beneficiary. If the condition in the will is not met and the person does not have another will - the estate distributes as if there were no will.
Living Wills are NOT Wills that Distribute Assets After Death
It's important to note that Living Wills have nothing to do with distributing assets after death. A living will sets up the medical wishes for health care in the event the person becomes incapacitated. See our article on Advance Health Directives for more information about living wills.
Why Do I Need a Will?
Having a will gives a person sole discretion and control over distribution of her assets. The person decides how personal belongings are given away. If the person has a business or investments, the will directs the easy transition of those assets.
Even if a person is young and has assets, he should have a will because if he dies without one, the relatives go through an expensive legal process to determine who inherits the estate.
What is Not Covered by a Will?
Wills can address all assets; there are some items that are not covered. Not included are, Community property, Life insurance policy proceeds and payouts, Retirement assets, Assets owned as joint tenants with rights of survivorship, and Investment accounts that designated as "transfer on death."
Other issues with wills:
- Wills do not provide sufficient tax planning such as paying federal, and state estate taxes.
- Wills do not protect your assets from creditors.
- Wills must go through probate, which can take a few months to a few years. This is expensive and complex. Going through probate opens the estate plan to become part of the public court records-listing beneficiaries, assets, and who's getting what and when they get it.
- Wills do not make provisions to medical health care wishes in the event the person becomes incapacitated.
There are some assets that are not covered by the instructions in a will like community property, life insurance payouts, retirement assets, investment accounts, and assets owned jointly by two or more people where the survivor automatically gains ownership.
What Happens If a Person Dies and Does Not Have a Will?
If you do not have a will, the state oversees distribution of assets according to a set formula. The formula followed is: Half of the estate goes to the spouse and the other half to the person's children. This creates financial havoc on the surviving spouse, especially if there is a house involved and the spouse is relying on the bulk of the assets to maintain a standard of living.
How do You Create a Will?
When you are ready, make a list of your assets and debts and include safe deposit boxes, items of sentimental value, family heirlooms and other assets to give away to a person or entity. If a person has substantial assets - ranging in the millions of dollars - or has a legally complex situation, make sure to enlist the services of an attorney. We recommend always seeking the advice of an estate planning attorney to fully understand your state's requirements and necessary information needed for a valid will.
Other stipulations needed to create a Will
- Be at least 18 years of age
- Act on free will
- Be of sound mind, memory and understanding
Note: If creating your own will, be sure to type it in a document and sign it in the witness' presence. To make the form legal, get it notarized. A witness cannot benefit from the will. An executor who acts as a witness loses any benefit.
What Information Should a Will Contain?
At a minimum, a will should contain the following information:
- The person's name and address,
- A cancellation clause - revokes appendices and previous wills. The executors are clearly stated and identified.
- The list of inheritances (gifts of money, gifts of real properties, or goods),
- A clause, arranging the remainder of the estate,
- The date,
- Signatures of the person creating the will (in front of two or three witnesses), and signatures of witnesses,
- Notarize the Will.
When to Update a Will?
Updating your will is important whenever a major event happens in your life. Your will should reflect all of your important family members and personal belongings and assets. Update a Will (at the time of events like):
- Marriage or forming a close relationship
- Child is born or adopted
- Selling or buying a valuable item, like real estate property
- In the event a person changes his mind about who manages the estate or receives assets
When updating a will, either add an amendment or create a new one. The amendment to the will is a codicil and requires the signature and date in the witness' presence.
After seven years of helping her aging parents, Carol Marak has become a dedicated senior care writer. Since 2007, she has been doing the research to find answers to common concerns: housing, aging and health, staying safe and independent, and planning long-term.
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