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What is a Simple Will?
A simple will is a document that designates how you wish
your property to be distributed among your friends, relatives,
and favorite charities.
Your will is also the place where you will identify people
for important roles, including:
- The guardians for your minor children: who will
care for and raise them.
- The executor for your estate: who will be responsible
for ensuring that all of your wishes as articulated in the
will are carried out.
- The trustees: who will manage any property you
wish to be held in a trust vehicle, usually for future use
by beneficiaries.
Why Do I Need to Write a Will?
Only a written will can guarantee that your instructions
will be known and followed after your death.
If you do not write a will, state law determines what happens
to your wealth. If all of your wishes are already consistent
with state law (very unlikely!), then perhaps you do not need
to write a will. Find out what your state laws are, what your
goals are and then decide for yourself.
In most states, if you have children but no spouse, the state
will appoint a guardian, and your children will receive the
money. A guardian for the children's property will be responsible
for attending to their finances while they are minors. There
is a lot to consider, but to ensure the safety and protection
of your loved ones, make your wishes explicit in a written
will.
If your parents are alive, and you are single with no children,
your parents will receive the money, even if you have been
living with a partner for many years.
If you have no surviving relatives, the state receives all
of your assets!
Without a will, your assets will not pass to your friends
or your favorite charitable organizations.
To ensure that your wishes will be carried out, it is imperative
that you write a will.
How Do I Get Started Writing a Will?
A handwritten will is legal in approximately 30 states, so
at the very least you should sit down and write one. To guarantee
that your will is valid, however, you need to find out exactly
what your state dictates.
Most states require that you:
- Be at least 18 years old.
- Be of "sound mind." This generally means that
you understand the extent of your property, who your relatives
are, what you are giving away, and to whom you're giving
it.
- Date and sign your will in the presence of at least 2
witnesses. In many states, a witness cannot be someone who
is a relative or a beneficiary of the will.
- State explicitly in the will that this is your last will
and testament.
- Name an executor of the will. The executor will have many
important responsibilities, among them, ensuring that all
of your wishes as articulated in the will are carried out.
For a list of these, see Administering
a Will.
Start thinking about whom you would like to ask to be the
guardian of your children and the executor of your will. These
may be the toughest decisions you make as you begin this process.
When Do I Need to Change My Will?
It turns out that your will can be nullified by most major
life changes. In general, a will is rendered invalid if you:
- Get married
- Have a child
- Get divorced
- Move across state lines
When you are married, the state assumes that in the event
of your death, you intend for your property to go to your
spouse (and children, if you have any). If you wrote your
will before you got married and didn't include your spouse,
the state considers your will invalid.
The same is true if you bear a child. If you don't change
your will to acknowledge the child, the state invalidates
your will.
Codicils are amendments to wills and can be attached directly
to the existing will.
So if you are getting divorced, remarried, are pregnant or
moving to a new state where the laws might be different, you
should rewrite or amend your will.
What is a Trust?
A trust is a legal arrangement whereby any form of property
is transferred to a trustee, who then manages the property
for the beneficiaries of the trust.
The assets in a trust remain under the supervision of a trustee
for whatever length of time that you deem necessary. You don't
have to be wealthy to consider establishing a trust. People
of all income brackets can benefit from transferring property
to a trust.
Who is a Grantor?
The Grantor is the person establishing the trust and the
transferred property is the called the principal.
What are the Different Kinds of Trusts?
- Revocable trusts can be modified while the grantor is
still alive.
- Irrevocable trusts cannot be modified while the grantor
is still alive.
- Testamentary trusts are established as part of a will
and become effective at the time of the grantor's death.
- Living trusts are established during the grantor's lifetime
and become effective immediately.
There is a trust for every occasion, and several are explained
below in Reducing Estate Taxes.
When Should I Consider Setting Up a Trust ?
- You have a disabled child who needs long-term financial
care. The assets in a trust can be managed and disbursed
over an extended period of time.
- You would like your children to have access to their inheritance
as they become mature enough to manage it responsibly.
- You wish to keep private the contents of your estate and
how your estate is being distributed. Wills are filed in
probate court and are available to the public, but trusts
are not.
- Probate of a will can take a long time. If there are challenges
to the will, it can be tied up in court for at least 6 months
and up to several years. A trustee can distribute property
immediately, as dictated by the trust.
- If you have property in several states, papers must be
filed in in each state's probate courts. To avoid this time-consuming
hassle, transfer these properties to a trust that can bypass
probate.
There are several tax advantages associated with certain
kinds of trusts. Check out Reducing
Estate Taxes to learn what
potential benefits are available.
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Wills
& Trusts
