Purpose of a will
A will can accomplish several estate planning goals for you including but not limited to:- Assign people to handle your estate
- Designate beneficiaries of your estate
- Name guardians for dependent children of your estate
- Establish a trust to control how assets can be used prior to distribution
- Establish a trust to control when assets are distributed to beneficiaries
- Waiving a probate bond
Without a will
Your state has a will prepared if you pass without a will (intestate). A spouse and children will typically inherit your estate. Next would be your closest relatives and if none can be located, your estate will go to the state. Since a will names guardians for dependent children, the decision will be left to court if neither parent is living.Basics for creating a will
- An attorney is not necessary to prepare a will, though an attorney can help ease concern over a will's effectiveness.
- The will must be dated and signed.
- Most wills must be signed by two witnesses who are not beneficiaries of your estate. Some states allow "holographic" wills which are not witnessed and must be handwritten.
- Notarizing signatures helps the court validate the will after you pass.
- Wills are typically not recorded in most states.
Executors / Personal Representatives
These people manage your estate after you pass. They file your will and appropriate documents with the probate court, sell assets, settle debts, pay taxes and distribute your estate. If you do not name an executor, a court will appoint an administrator, typically a close relative or beneficiary able to handle the task. When the estate is small enough to avoid probate, family can appoint informal estate representative to handle debts, taxes and distribution.Guardians
If neither parent is able to care for a minor child, a guardian must be named until the child becomes a legal adult. If a will is not left naming guardians, the state in which you reside will name a legal guardian. It's best if parents name the same guardian(s) in their respective wills to avoid future problems. Read more about choosing guardians for children. The guardian can also be named to manage property for the child or someone else can be named to manage the assets. An easy way to manage assets for a young beneficiary is to set up a trust, either a testamentary trust (read below) or a living trust.Beneficiaries
Anyone can be named a beneficiary. Almost anyone can be disinherited. Regardless of what a will says, in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) a spouse is generally entitled to half of the assets and earnings. In non-community property states, the spouse may legally claim a portion of the estate, typically a third to half. Children may be disinherited. If you forget to add a new child after creating a will, the child typically has a right to claim a portion of your estate. Once a beneficiary receives an inheritance, the beneficiary may do whatever he or she chooses to do with the asset. If you would like to have some control over when and how assets are used, a testamentary trust (read below) or a living trust can offer various levels of control.Testamentary Trusts
A testamentary trust is similar to a living trust but instead of being created during the creator's lifetime, the trust is created by a will after the will's creator passes. A will can create multiple testamentary trusts and some or all assets in the estate may be assigned to the trust. Purposes for a testamentary trust:- Control property for minors or beneficiaries who spend recklessly
- Creating life estates for a beneficiary to use certain assets before those assets are distributed to someone else
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Young beneficiaries
A young family not concerned with probate and with few assets has a term life insurance policy for $500,000. The parents do not want their children to potentially receive a large sum of cash at age 18. The parents could create a will to name guardians for the children and include provisions for a testamentary trust to hold the life insurance proceeds until the children are age 30. If the children need money prior to age 30, the children or their guardians could ask the trustee for a partial or full early distribution for health, education, maintenance or support needs.
Surviving spouse
In a second marriage, the wife owns the primary residence. If she passes first, she would like her husband to continue living in the home until he chooses to move out or passes away. When either happens, the home is then distributed to her children. The testamentary can also hold money to help pay for the mortgage, taxes and utilities if the will instructs money to be transferred into the trust..
