Death is an inevitable part of life, and although it may be uncomfortable to think about, planning for your passing is essential. A will, also known as a last will and testament, is a crucial legal document that allows you to outline your wishes for your assets after you pass away.
In this post, we will delve into the importance of having a will, the cost associated with creating one, and how to avoid common mistakes during the process.
Here’s everything you need to know about the functionality of a will.
Understanding the Concept of a Will
A will is a formal document that specifies your desires regarding the distribution of your property, possessions, and finances upon your death.
By creating a will, you can designate who will inherit your assets, such as real estate, vehicles, bank accounts, investments, and personal items. Additionally, a will allows you to appoint a guardian for minor children and select an executor who will be responsible for executing the instructions outlined in your will.
When selecting an executor, it is crucial to choose someone you trust completely to carry out the instructions in your will,” advises Jamy Barreau, an estate planning attorney in Port St. Lucie, Florida. “It is also important to choose someone who meets the legal qualifications to serve. For instance, in Florida, a convicted felon cannot serve as a personal representative.”
Barreau emphasizes the importance of naming a successor in case the primary executor in your will is unwilling or unable to fulfill their duties.
A will covers various critical aspects, including:
- Distribution of assets: A will specifies who will receive your assets after your passing. You can designate beneficiaries for specific items or distribute your entire estate based on percentages.
- Guardianship of minor children: If you have children under 18, you can appoint a guardian in your will to care for them if both parents are deceased.
- Care of pets: For pet owners, a will can designate a caretaker for your pets, ensuring their well-being after your demise.
- Debt settlement: Your will can detail how you want your debts to be resolved after your passing, including specifying accounts for debt repayment.
- Charitable contributions: If you wish to leave a donation to a charity, a will allows you to specify the nonprofit or organization you want to support.
Cost of Creating a Will
The cost of creating a will can vary depending on several factors. A simple estate with minimal assets will typically require a less expensive will compared to a complex estate with numerous beneficiaries and properties. Generally, you can expect to pay around $150-$300 for a basic, DIY will.
If you opt to seek assistance from an attorney, it’s important to note that legal fees vary by location. Drafting a will with the help of a lawyer in New York City will likely cost more than creating one in rural Indiana.
While creating a simple will on your own is an option, consulting with an estate planning attorney is advisable to ensure the proper construction of the will. However, it’s essential to be aware that hiring an attorney can increase the cost of a will by $300 to $500 or more.
Types of Wills
There are several types of wills, each with its own benefits and limitations. Here’s a brief overview of some common options:
- Simple will: A basic will suitable for individuals with a modest estate and straightforward wishes. It outlines asset distribution and appoints an executor.
- Testamentary trust will: This type of will establishes a trust within the document, allowing for greater control over how assets are distributed and managed, especially for beneficiaries who may not be financially responsible with their inheritance.
- Holographic will: A handwritten will, typically considered a last resort due to potential legal challenges regarding its validity. It’s important to check your state’s specific requirements for holographic wills if you choose this option, as the document may not hold up in probate court later on.
- Joint will: A single will created by two spouses that outlines their combined wishes for asset distribution and appoints guardians for any minor children.
Consequences of Dying Without a Will
Dying without a will, known as intestacy, can result in a lengthy and potentially messy legal process.
The state will intervene and distribute your assets according to intestacy laws, which may not align with your wishes. In most states, assets are first inherited by the spouse, followed by the deceased’s children, and then any surviving immediate family members, such as siblings or parents.
This can lead to complications and conflicts among family members.
“Intestate estates often face more litigation as heirs dispute who should receive what and who should be in charge,” explains Sean Williams, a certified financial planner and principal at Cadence Wealth Partners in Concord, North Carolina.
Without a will, the intestacy laws of the state may distribute your assets to unintended beneficiaries or exclude other family members.
Williams shares a personal experience where his father-in-law passed away without a will about eight years ago. Due to intestacy laws, all of the man’s assets went to his second wife, leaving his adult children with nothing.
“This situation caused a lot of conflict and irreparably damaged an already strained relationship,” recalls Williams.
For parents, dying without a will could leave their children in a legal limbo. The court will determine the guardianship of any minor children, which can add further emotional distress during an already challenging time.
“Specifying guardianship can help prevent disputes among siblings and grandparents regarding what they believe is in the best interest of their nieces, nephews, or grandchildren,” says Williams. “It can also appoint a close family friend, outside of immediate family, which might not be possible if left to the court’s decision.”
Whether you have a will or not, your estate may undergo probate – a court process that can be time-consuming and costly. However, having a will can streamline the process and make it easier for your family members.
“If everything is documented correctly in a will according to the relevant state laws, the estate is generally bound by those terms regardless of any dissatisfaction from specific individuals, such as family members,” explains Barreau.
Will vs. Trust: Understanding the Difference
While wills and trusts are both estate planning tools, they serve different purposes.
Wills focus on distributing assets after your death, but these assets still need to go through probate. Wills are relatively easy to create but offer limited control over how assets are managed post-inheritance.
On the other hand, trusts enable you to transfer ownership of assets to a trustee who will manage them for the benefit of designated beneficiaries. Trusts provide more control over asset distribution and, if structured correctly, can avoid probate. However, trusts are more complex to establish and typically require legal assistance from an attorney.
The decision between a will and a trust depends on your individual circumstances and the complexity of your estate. Consulting with an estate planning attorney can help you determine the most suitable option for your needs.
Creating a Will: Step-by-Step Guide
Creating a will is a relatively straightforward process, but it is essential to ensure that it is done correctly to make the document legally binding.
Here’s a breakdown of the steps involved:
- Gather information: Before drafting your will, compile a list of your assets and liabilities, including bank accounts, investments, real estate, vehicles, and any debts you owe.
- Consider your wishes: Decide who you want to inherit your belongings and in what proportions. Reflect on who you would like to appoint as your executor and guardian for minor children.
- Choose a will format: Select the type of will that best suits your requirements. Simple wills are readily available online, but for a more complex estate or unique circumstances, it is recommended to consult with an attorney.
- Draft the will: If you opt to create your own will, ensure that it complies with your state’s legal requirements. Most states mandate that wills be in writing, signed by the testator (the person creating the will), and witnessed by a specific number of individuals (typically two).
- Sign with witnesses: Once the will is drafted, sign it in the presence of your witnesses. The witnesses should also sign the document, acknowledging their presence during the signing. Keep several copies of the will.
- Securely store your will: Keep the original will in a safe and secure location, such as a safe deposit box or with a trusted friend or family member. Inform your executor of the will’s whereabouts.
Final Thoughts
A will is a fundamental tool for estate planning that empowers you to make informed decisions about your legacy and assets. It provides peace of mind knowing that your loved ones will be taken care of and your assets distributed according to your wishes. While you can create a basic will on your own, consulting with an estate planning attorney is recommended to ensure its validity and compliance with state laws.