Wills: The Basics
Dying Without One Causes Hardships for Survivors
A will is a legal document that details how to divide a person's property after death. It also names a guardian for children younger than 18. Property refers to everything a person owns, from homes, bank accounts, stocks and bonds to a favorite car or piece of jewelry. A will is only one way to distribute property; trusts are another. Both have advantages and disadvantages.
Many people don't draw up a final will until they realize they soon may need one. This means it often falls upon caregivers to help an ailing senior put it together. The process can involve tracking down earlier wills, collecting detailed information on assets and debts, researching state and federal laws, obtaining the right legal forms and possibly finding and consulting a lawyer.
Everyone needs a will, even those with small estates. When a person dies without a will - known as dying intestate - the state steps in to dispose of the assets. In most cases property passes to a spouse and any children, but the formula for distributing assets varies from state to state. Dying intestate can cost far more in taxes; cause legal, bureaucratic and emotional difficulties for survivors, and ultimately keep the property from going where the person wanted it to go.
Even if people pass along most of their estates through trusts, they still need a will to cover any gaps, pass property on to children born since they created the trusts or dispose of recently acquired assets. If no spouse or children exist, property will go to other relatives - parents, siblings, nieces and nephews and further along the family tree. If no relatives surface, the state will take the money.
A will is a good idea even when a married couple owns all their property jointly in case both die at the same time. This is especially important if the couple has minor children. Otherwise, the state would name guardians for both children and property - and they could be strangers.
Yes, but not all wills are equal:
An oral will is valid in only a few states and in extreme situations - for example, on a deathbed.
A dated and signed handwritten will is legal in many states but may be easier to challenge in court than a printed one.
Several states offer fill-in-the-blank type wills, called statutory wills, but they provide limited options. Stationery stores and law-related Web sites feature tools ranging from simple pre-printed forms with no instructions to sophisticated software that helps customize a will and prints a final copy.
Joint wills can simplify affairs for married couples but can't be changed after one spouse dies.
Accounting for every scrap of property and deciding how to divvy it all up are the hard parts. It often helps property owners to remember they can change the will later as often and as much as they wish.
Engaging a lawyer is not necessary. However, lawyers can offer guidance in making complicated decisions about how best to structure a will - how to establish trusts, protect assets from creditors or avoid estate taxes, for example.
Federal estate taxes kick in when assets top $675,000, so it is important to consider trusts or other options if the estate is worth more. That threshold will rise to $1 million by 2006.
Some assets, like 401(k) funds and life insurance policies, are not included in a will because such accounts have their own designated beneficiaries.
State laws often require that certain assets - a house, for instance, or a proportion of total wealth - pass to a spouse, no matter what a will might indicate. In states with community property laws, each spouse automatically owns half of all worth accumulated during the marriage. In other jurisdictions, a spouse written out of a will still can file a challenge.
Disinheriting children can require special steps. In many states, the law presumes children not mentioned in a will were left out as an oversight and grants them the right to file for a portion of the estate. If the intention is to disinherit someone, the will should say so explicitly.
A will must name an executor to collect documentation of bank accounts and insurance policies, protect assets, pay debts and taxes owed by the estate and carry the will through probate. This big job should go to a responsible person the beneficiaries know and respect. They often are family members or close friends but also can be financial experts or trusted legal advisers.
Divorce can automatically void a previously written will, depending upon the state.
Most wills must go through probate, which means a court authenticates the will, determines its assets, verifies the debts against it and supervises dispersal of the property. This can take six months to a year and may require a lawyer.
A will is legal only if signed. And two or three people, depending upon the state, must witness it. But those named as beneficiaries in the will should not sign the document as witnesses or they may be barred from inheriting.
A will should be kept in a safe place, such as a fireproof box at home or a lawyer's office. A safe deposit box can be troublesome for survivors to access on short notice.