No one wants to think about dying, especially when young and healthy, but tomorrow is never guaranteed. Leaving this world unprepared can result in confusion and expense for your surviving loved ones. That’s why it’s important to consider your Last Will and Testament as part of your broader financial plan, even though it won’t take effect until after you die. Your estate — which includes your assets and financial affairs — will, by definition, outlive you. So it makes sense to treat your estate with the same care and planning that goes into your career choices, investments, and retirement plan. No, you can’t take it with you, but wouldn’t you rather have a say in how your estate is handled after your death, as opposed to leaving it up to the courts?Let’s discuss the importance of drafting a Will, what’s involved, and how your Will fits into your broader financial plan.
What exactly is a Will?
A Last Will and Testament — often just called a Will — is a legally binding document where you leave instructions for how your money, property, and other assets should be handled after your death. It’s also an opportunity to pass on items of sentimental value or personal messages to loved ones. Your Will doesn’t take effect until you die.
To write a valid Will, you must be mentally competent. This means, for example, that you may not sign a Will if you have been diagnosed with dementia. In most states, you will need at least two witnesses who are 18 or older to observe your signing of the Will and vouch for your mental competence. Although there are instances when it may make sense to have more than one Will, each addressing different aspects of your estate, it’s important that the Wills do not conflict with one another.
In your Will, you’ll name beneficiaries, typically family members and close friends, who will receive portions of your estate. You also may leave assets to charitable groups and nonprofit institutions, such as hospitals, universities, and cultural organizations.
Finally, you’ll need to name an executor for your estate, who will disburse property according to your wishes, pay your debts (ideally with cash set aside for that purpose), and generally represent your intentions as expressed in your Will. This could be a family member or someone you trust, but who you choose should be organized and responsible.
What may I include in my Will?
In addition to naming beneficiaries and an executor, the three main elements generally included in a Will are:
- Assets. This includes almost all of your belongings and anything else of value, including bank accounts, investments, automobiles, and family heirlooms.
- Real property. The term “real property” refers to land, homes, buildings, and other property tied to a specific location.
- Guardianship. If you have minor children or other dependents (including pets or livestock) when you create your Will, it’s important to name someone to be their legal guardian in the event of your death.
What may I leave out of my Will?
Not everything having to do with your estate needs to be included in your Will. If you already have a Living Trust, you would not need to include anything that’s named in the Trust in your Will. Other items that don’t need to be discussed in a Will include:
- Property owned in joint tenancy with the right of survivorship. A primary residence jointly owned by you and another person with the right of survivorship becomes the sole property of the other person when you die.
- Life insurance policies. These already have named beneficiaries, so you don’t have to do anything further regarding these policies in your Will.
- Retirement accounts. IRAs, 401(k)s, and other pension or retirement accounts also already have named beneficiaries, so you don’t need to mention them in your Will.
May I change my Will after it’s signed?
People may, and often do, change their Wills more than once in their lifetimes.
These adjustments, also called amendments, typically reflect major life changes, such as marriage, divorce, the birth or adoption of children, or a change in assets. The two main ways to change your Will are to write a new one or to amend the existing Will with a supplemental document called a Codicil. If you want to make substantial changes, it’s a good idea to write a new Will and destroy the old one. If you just want to make minor changes, such as updates, additions, or deletions, a Codicil may work just fine.
What happens if I die without a Will?
If you die without a Will, your estate will be divided according to the probate laws of your state, or for real property (such as land or a home), in the state that real property is located, regardless of your preferences. Without a Will, any property that’s not in a Trust will go through probate court and will be managed according to certain factors, such as:
- Your marital status
- Your state of residence
- Whether you have any minor children or other dependents
- Your debts
Additionally, a court-appointed executor will generally have to use funds from your estate to pay your debts and all court fees before distributing your remaining assets to your beneficiaries. What’s more, those beneficiaries will be determined by state law, not your wishes. Writing a Will now, even if you suspect you’ll need to make changes later, is a great way to spare your loved ones the added time, expense, and confusion of the probate process.
Life is uncertain: Write your Will today
It’s not easy to confront our own mortality, but it’s important. If you’ve created a household budget, put aside money for an emergency fund, and set up a retirement fund, then you should also develop an estate plan. The Last Will and Testament isn’t the only estate planning tool available, but it’s arguably the most important. If you have legal questions about Wills, don’t hesitate to ask an attorney.