WHAT DOES A WILL DO?
The simplest way to ensure that your
funds, property and personal effects will be distributed after your
death according to your wishes is to prepare a will. A will is a legal
document designating the transfer of your property and assets after you
die. Usually, wills can be written by any person over the age of 18 who
is mentally capable, commonly stated as "being of sound mind and body."
WHO NEEDS A WILL?
Although
wills are simple to create, about half of all Americans die without one
(or Intestate). Without a will to indicate your wishes, the court
steps in and distributes your property according to the laws of your
state. Wills are not just for the rich; the amount of property you have
is irrelevant. A will ensures that what assets you do have will be given
to family members or other beneficiaries you designate. If you have no
apparent heirs and die without a will, it's even possible the state may
claim your estate.
Having a will is especially important if you
have young children because it gives you the opportunity to designate a
guardian for them in the event of your death. Without a will, the court
will appoint a guardian for your children who may be someone you do not
even know.
WHAT ARE THE ELEMENTS OF A WILL?
What you generally need to make a will:
1) Your name and place of residence;
2) Names and addresses of spouse, children and other beneficiaries, such as charities or friends;
3) Alternate beneficiaries, in the event a beneficiary dies before you do;
4) Name and address of an Executor/ Executrix to manage your estate;
5) Name and address of an alternative Executor/Executrix, in the event your first choice is unable or unwilling to act;
6) Name and address of a guardian for your minor children;
7) Name and address of an alternative guardian, in the event your first choice is unable or unwilling to act;
8) The age you wish your minor children to have control of their inheritance;
9) Any burial requests you may have (cremation, where you want to be buried, etc.);
10) Your signature;
11) Two Witnesses' signatures; and
12) Notarization.
Two
of the most important items included in your will are naming a guardian
for minor children and naming an Executor/ Executrix.
WHAT IS A GUARDIAN?
In
most cases, a surviving parent assumes the role of sole guardian.
However, it's important to name a guardian for minor children in your
will in case neither you nor your spouse is able and willing to act. The
guardian you choose should be over 18 and willing to assume the
responsibility. Talk to the person ahead of time about what you are
asking. You can name a couple as co-guardians, but that may not be
advisable. It's always possible the guardians may choose to go their
separate ways at some later date, and, if so, a custody battle could
ensue. If you do not name a guardian to care for your children, a judge
will appoint one, and it may not be someone you would have chosen.
WHAT IS A EXECUTOR/EXECUTRIX AND WHAT DO THEY DO?
An
Executor/Executrix is the person who oversees the distribution of your
assets in accordance with your will. Most people choose their spouse, an
adult child, a relative, or a friend to fulfill this duty.
If no
Executor/Executrix is named in a will, a Probate Judge will appoint one.
Probate refers to the legal procedure for the orderly distribution of
property in a person's estate. The Executor/Executrix files the will in
probate court, where a Judge decides if the will is valid. If it is
found to be valid, assets are distributed according to the will. If the
will is found to be invalid, assets are distributed in accordance with
state laws.
Responsibilities usually undertaken by an Executor/Executrix include:
--Paying valid creditors;
--Paying taxes;
--Notifying Social Security and other agencies and companies of your death;
--Canceling credit cards, magazine subscriptions, etc.; and
--Distributing assets according to the will.
WHAT ABOUT UPDATING MY WILL?
You'll
probably need to update your will several times during the course of
your life. For example, a change in marital status, the birth of a child
or a move to a new state should all prompt a review of your will. You
can update your will by amending it by way of a Codicil or by drawing up
a new one. Generally, people choose to issue a new will that supersedes
the old document. Be sure to destroy the old will after you sign a new
one.
WHAT ABOUT ESTATE TAXES?
The property included in your will may be subject to taxation. In planning your will, take into account the following:
---Federal
estate taxes will generally be due if the net taxable estate is worth
more than $1,000,000. This amount is scheduled to gradually increase
from $1,000,000 in 2002/2003 to $3,500,000 in 2009 so that it will
eventually shield $3,500,000 in gift or estate transfers from tax per
taxpayer. Estates in excess of the exempt amount can be taxed at a rate
from 37% to 50% (the top percentage is scheduled to gradually decrease
to 45% in 2009). Also, note that these estate tax changes are scheduled
to be repealed in 2010. If not extended, the tax law will revert to the
estate and gift tax provisions in affect in 2001. Consult a tax or
financial professional to determine a plan that is right for you and
your family.
---State death or inheritance taxes
---Federal income taxes
---State income taxes
You
may be able to minimize your estate tax by establishing a trust or
giving gifts during your lifetime. You can also cover the cost of estate
taxes by purchasing a life insurance policy intended to pay taxes. Talk
to your life insurance agent to find out more about how this works.
WHERE SHOULD I KEEP MY WILL?
Once
your will is written, store it in a safe place that is accessible to
others after your death. I suggest that you keep it in a fire proof box
that you can purchase at any office supply store. I do not suggest
that you keep your will in a safe deposit box because many states will
seal your safe deposit box upon your death. Make sure a close friend or
relative knows where to find your will.
WHAT IS A LIVING WILL?
A
living will is not a part of your will. It is a separate document that
lets your family members know what type of care you do or don't want to
receive should you become terminally ill or permanently unconscious. It
becomes effective only when you cannot express your wishes yourself.
Discuss your wishes as reflected in your living will with family
members, and be sure all your doctors have a signed copy.
WHAT IS A POWER OF ATTORNEY FOR HEALTH CARE (HEALTH CARE PROXY)?
A
power of attorney for health care (health care proxy) is not a part of
your will. It is a separate document that authorizes someone you name to
act in accordance with your medical intentions. It becomes effective
only when you cannot express your wishes yourself. You should make sure
that all your doctors have a signed copy.
WHAT IS A FINANCIAL DURABLE POWER OF ATTORNEY?
A
financial durable power of attorney is not a part of your will. It is a
separate document that authorizes someone you name to act in accordance
with your financial intentions. It becomes effective only when you
cannot express your wishes yourself. You should make sure that all your
financial professionals (stockbrokers, accountants, financial planners)
and banks have a signed copy.
PLAN AHEAD
The end of your
life is something you probably don't want to dwell on, but thinking
about what will happen to your loved ones and your assets and personal
possessions is important. Making sure you've done all you can to make
their lives easier will give you peace of mind. And once your will is
drafted, you won't have to think about it again unless something
significant in your life changes.
Sheri R. Abrams is an Attorney in Fairfax, VA. Her practice is
limited to the areas of Social Security Disability Law and the
preparation of wills, living wills, health and financial powers of
attorney. Ms. Abrams is a graduate of Boston University's School of
Management and the George Washington University School of Law. Ms.
Abrams is rated "AV" by Martindale-Hubbell. More information can be
found at http://www.sheriabrams.com
sheri@sheriabrams.com
