We have always recommended that our clients have at a minimum the following three estate documents: Will, a power of attorney and a medical directive. In this week’s post, we will discuss why a will is necessary. While we are not attorneys, this will help you understand the general terms and some items that your attorney will discuss with you.
The Will is the cornerstone for many estate plans. The Will transfers assets, appoints a guardian for minor children and names an executor. The Will is a public record and only takes effect when you die. If you would like to transfer assets privately, it would be better to create a living trust to hold the assets while you were alive and then they would be transferred privately upon your death.
Let’s take each of the items separately: transfer of your assets. If you are married, generally individuals have all of their assets transferred to their spouse. It’s best to determine what assets you both own individually and if you married – jointly. This list would include any real estate and personal property. The personal property can be individually listed or can be included in a lump-sum estimate. The Will is where you can specify individual items such as a sentimental watch be given to it specific person.
You should be aware that even if you put into the Will that everything should go to a certain individual, there are two widely held assets that have specific instructions attached to them. These two assets are a 401(k) plan or individual retirement account (IRA) (as well as life insurance proceeds). They should be reviewed to ensure they are going to the correct beneficiaries.
A word of advice about dividing assets among your children. It is often best to divide all the assets equally among your descendants so as not to rekindle old rivalries or ignite new ones. You would not want to leave a lingering question of why someone received less than their sibling.
Appointing a guardian for minor children: It is important that parents seriously consider who would take over for them in this very important role if both parents were to die prematurely. Part of the consideration must be the ability of the Guardian to handle this enormous task.
Naming an executor: an executor is the person or institution that administers the estate until it is legally closed. This is a very important function as this person will been entrusted to carry out the wishes that you have laid out in the will.
The first step for the executor is to have the will probated. This is where any outstanding credit is to be paid, potentially taxes are paid and then the beneficiaries named in your will should receive their share of what’s left.
Who should be named executor? Most people automatically think to name a family member (a spouse or child) as executor. It makes sense in that they would likely understand your intentions better than anyone else. However, putting family members in charge does have drawbacks especially when conflicts of interest potentially arise.
For that reason, it may be helpful to name a professional who is the sole executor, or it might even be best to name the professional as co-executor with a family member or trusted friend. Professional executives include a corporate fiduciary such as a bank or trust company. The most important consideration is who will be in the best position to follow your wishes as outlined in the estate document. It may be wise to have a conversation with your spouse regarding who will be the executor of your estate.
About half of the adults in in the U.S. do not have a Will. If you die without a will, your estate will follow the rules set forth by your individual state. The result of how your belongings are distributed by the state may not be what you want.
So, if you do not have estate documents yet, let’s move it to the top of your “to do” list. If you have an updated Will, make sure its location is known to those who will need to secure the document upon your death.
Hope you have a great week!
If you know of anyone that you think would appreciate this email, please don’t hesitate to forward it on.