We’ve all heard that we should create a will, oftentimes referred to as a “last will and testament.” What is a will and what role does a will and living will play in estate planning?
What is a Will?
A will is a legal document that details a person’s final wishes concerning what they want to happen after their death. A court of law then ensures that these final wishes are carried out.
Wills are used to accomplish a number of important objectives, including the following:
- State who should receive property
- Appoint a guardian for minor children
- Determine how taxes, expenses, and debts should be paid
- Name an executor
- Do tax planning
- Create trusts
- Provide for the disposition of property not properly titled to a living trust
If you die without a will, these decisions, many of them highly personal and important, will most likely be made for you by the applicable state intestate succession laws.
Do you really want a court of law choosing who will raise your children or who will receive your property after you die when you could probably create a will in 20 – 30 minutes and decide this for yourself?
What is a Living Will?
Don’t confuse a last will and testament with a living will. They are separate legal documents used to accomplish completely different objectives. So what is a living will?
A living will is a legal document used to set forth your healthcare wishes in terms of life support in the event of incapacity; a living will has nothing to do with the transfer of property at death.
For example, you can document in a living will whether you want your life artificially extended or not if an injury or illness were to cause such a predicament.
Many people create both a last will and testament and a living will.
Failing to Plan
A last will and testament may be the most important legal document you or I ever sign. Sadly, studies have shown that well over half of all adult Americans don’t have a will. Failure to create a will and a proper estate plan can lead to significant consequences for loved ones:
- Assets not passing to the desired beneficiaries
- Increased fees, delays, and taxes
- Division, contention, confusion, and uncertainty within a family.
Is this really the legacy you want to leave your loved ones? Wouldn’t it be better to leave a carefully planned out legacy that prevents your loved ones from having to deal with any unnecessary confusion, division, or hardship?
If you cared for your loved ones while you were still alive, why not ensure they are properly taken care of in the manner you wish after you are gone?
Property Controlled by Will
For example, a high yield savings account or money market account owned as a joint tenant with right of survivorship will generally pass to the surviving tenant at death, regardless of what a will says.
So what property does a will control? A will generally controls the disposition of property subject to probate.
What if I Don’t Have a Will?
If you die “intestate,” or die without a legally valid will, you will have no say in who inherits these assets.
You may want your diamond ring to go to your niece, your stamp collection to go to your grandson, and $20,000 to go to your alma mater. However, if you don’t have a will, these wishes may not be fulfilled.
Instead, state intestacy laws will decide what each relative receives, if anything. Friends, unmarried partners, and charities are normally out of luck.
Additionally, without a will, you may have no say in who is assigned to be a guardian over your children.
How to Create a Will
Creating a will is generally pretty simple. Here are some of the most common ways to create a will:
There are a number of online providers of legal documents. For a small fee, these online providers will ask you various questions and then create a will and other important estate planning documents based on your responses.
Using one of these services, you can generally create a will in about 15 – 30 minutes at a small fraction of the cost an attorney would charge you.
One of the most popular and respected online will providers is Nolo. Nolo has a 100% money back guarantee and allows unlimited revisions, all for a very reasonable price.
Estate Planning Software
Another inexpensive option is to use software, such as Quicken WillMaker, to create a will and other estate planning documents.
Estate planning software and online providers of legal documents tend to be much less expensive than hiring an attorney but are probably not appropriate for people with complex financial affairs.
If any complexity is involved, your best bet is probably to use an attorney, even if it costs substantially more.
Hire an Attorney
An attorney can also prepare a will and other appropriate estate planning documents for you.
Attorneys are likely to charge at least several hundred dollars an hour for their work. Although generally much more expensive than an online provider or software, using an attorney is highly recommended if your estate is large or complex.
For example, you should probably use an attorney if:
- Your estate is large
- You want to disinherit a child or your spouse
- You are worried about estate taxes
- You would like to control what happens to your assets for a long time after your death
- You are worried about someone challenging your will
If you decide to use an attorney, find an attorney that specializes in estate planning.
How to Change Your Will
A will is a revocable document, meaning that it is not set in stone. You can update it at any time and as often as you wish during your life. As your circumstances and laws change, it may be appropriate to update or replace your will.
After your Will is Created
A will is not something that you can just cross off your list of things to do and forget about once it is done. As tax laws and your own circumstances change, make sure you keep your will and other estate planning documents up to date so that they accurately reflect your wishes.
It’s probably a good idea to review it at least every year or two. I’d also review it after major life events, such as a birth, divorce, illness, or death in the family.
Make sure that your attorney, advisors, and family members either have a copy of your will or know where to find it. Your will is pretty much worthless if nobody knows it exists.
For additional information about wills and estate planning, check out the below books:
- American Bar Association Guide to Wills and Estates: An Interactive Guide to Preparing Your Wills, Estates, Trusts, and Taxes
- The Executor’s Guide: Settling a Loved One’s Estate or Trust
- Plan Your Estate
- Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide
What are your thoughts about creating a will and living will? Have you created a will or living will? Leave a comment below!