If you walked out your front door and got run over by a bus, what would happen to all of your assets after you were gone? If you don’t have a will, the state will often decide through a lengthy probate process. When you make a will, you leave a blueprint for how you would like your property to be distributed and for whom you would like to do the distributing.
Many people mistakenly assume that wills are just for those with a lot of assets, but everyone needs one. Even if the only value you have of your possessions is sentimental, wouldn’t you like to choose who they go to after you die? Writing a will not only allows you to pass on your stuff to those who mean the most to you, but it also prevents your loved ones from fighting over what you leave behind.
A will isn’t solely about who gets what, however. There are a number of other things that are provided for in a will including:
1. Who will serve as your personal representative/executor? Your personal representative/executor is the person who carries out the wishes in your will. This person is responsible for making sure that your estate is distributed as you wanted and that any debts are paid off. This is usually a lawyer, accountant, family member or close friend. The powers of the executor as spelled out in the will.
2. Care of minor children. If you have children, it is crucial that you have a will to determine who will serve as their Guardian until they come of age. You may not think this is important if you have a spouse, but what if both you and your spouse are killed in an accident? Who would take care of your kids then? You may also want to designate a caretaker for you pets, or they could end up at a shelter.
3. Guardian for assets left to minor children. If you leave money to your children and they are minors, you’ll need to have a trusted adult manage that money until the children become adults.
While having a will is vitally important, it is only one part of your estate plan. A will does not cover all of the bases in your estate including:
1. Life insurance payouts. You choose the beneficiaries of your life insurance policies when you take out the policy (or change the policy). No matter what you write in a will, it will not change who gets your life insurance benefit.
2. Community property. While state laws differ, in most cases you cannot disinherit your spouse from the property you both share.
3. Assets held in joint tenancy with rights of survivorship. Any property held in joint tenancy passes onto the other tenant(s) when you die regardless of stipulations in your will.
4. Retirement assets and “transfer on death” accounts. Like life insurance policies, these retirement accounts and certain other accounts designate beneficiaries in their agreements. Those beneficiaries cannot be changed by a will.
There are kits you can buy to help you make your own will, but it’s wise to consult with an experienced estate attorney. How you set up your will may help minimize the amount of taxes your beneficiaries have to pay and will prevent you from overlooking assets that should be included.
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