Essential issues when drafting a will.
It may not be quick or easy to do, but the peace of mind gained by drafting a will is well worth the time and effort.
People have all sorts of reasons for wanting a will or not; and drafting a will isn’t something most people look forward to doing. But the fact is it is necessary and indispensable for many reasons; and the peace of mind is immensely reassuring
Imagine if both you and your spouse die at the same time, or, if you, as a single parent, pass away. What would happen to your children? If you do not appoint a guardian for your minor child, the state will appoint one for you. And while the court’s decision may be a logical one, it may not be right for you. You are the person who should decide who will care for your child; and, make arrangements to make that happen in the event of an unexpected or premature death. A will is the only way to make sure that happens on your terms. And, be sure to discuss your desires with the person you want to appoint as guardian so this can be an informed decision for both of you. Consider the guardian’s health, age, financial means, and willingness to care for children when deciding who would be best. And, purchasing a life insurance policy on your life, payable to the guardian at your death, may be what makes this work and allows the guardian and your child to live happy, fulfilling lives.
Most estate plans—whether for modest or complex estates—include a trust. Like a will, a trust is a legally binding contract that allows you to be as specific and detailed as you want as it relates to the care of your children and disposition of your assets. In addition to leaving funds for the guardian to accommodate and raise your child, you will probably leave cash or other assets to your children. To make certain those funds and assets are used exactly as intended, you should set up a trust; and, if your child is a minor at your death, a trust will be necessary to protect his or her interest at least until the age of majority in the state (typically 18; could vary by state). A trust allows you to determine when and for what purpose the funds are distributed. Trust assets can be distributed as a lump sum, or on an “as needed basis,” to better safeguard and protect the assets set aside for your children. Talking with a qualified estate planning attorney is the best way to evaluate options and finalize the terms of your trust.
Information on basic wills can be found online; but it’s best to visit a local estate planning attorney to draft a will and trust suited to your needs and circumstances.
If everyone should have a will; why doesn’t everyone have one?
Many people make their decisions about their estate plan based on misinformation or misconceptions. Here are some of the more common rationalizations for not creating a will, and the facts that may quickly dispel those myths.
Myth: “My assets are so small that a will is not necessary.”
Fact: First, most people are worth more than they realize when they add up all of their personal property and assets including IRAs and other retirement plans; life insurance; savings accounts; investments; and inheritances. But if you key in on the size of your estate to determine whether or not you need a will, you are missing the more important reasons for which a will may be necessary, or at least helpful.
- A will lets you make specific bequests of property to your heirs of choice, rather than having your estate divided randomly among all of your heirs. This may be particularly important with assets having sentimental value.
- A will is the surest way to appoint guardians for your children.
- Disposing of your estate through a will and trust provides added asset protection. Remember assets that pass through a will or testamentary trust are still required to go through the probate process; inter vivos or living trusts will avoid probate.
- Combining a pour-over will with a trust aggregates all of your assets at death and provides a single plan with specific instructions for the distribution of your estate, making your estate significantly easier to manage after death.
- If you have children from your current or a prior marriage, wills and trusts are the best way to make sure assets of your choosing ultimately go to your children.
Myth: “When I die, my spouse will get all of my assets anyway.”
Fact: This is not a good assumption and, is not always true. If you own property with someone and title is held in a manner that is consistent with your desires, intentions, and provisions of your will, title—not your will—your takes precedence. Also, in a community property state, your share of the community is your personal property and does not automatically go to your surviving spouse. If your spouse remarries after your death and you want to guarantee specific assets are set aside for your children—rather than the new spouse—a will and trust are necessary.
Myth: “I can create a will on my own and save the legal costs.”
Fact: “Do-it-yourself” wills often do not contain all of the necessary components as required by law to protect your interests; and a vaguely worded clause or document could result in lengthy legal battles, will contests, and family strife. Even “simple” wills are complex legal documents, and, not working with a qualified lawyer would be a costly decision.
Myth: “I don’t want my final wishes to be set in stone. I’ll create a will later in my life.”
Fact: Even though a will is a legally binding contract, it can be amended when facts, circumstances, laws, intentions, and relationships change.
A will is intended to be reviewed periodically and changed as necessary. The worst decision is doing nothing and not having a plan in place when it is needed. A will only becomes set in stone (irrevocable) at death. Remember, the terms of a will only become effective at death.
A New York Life agent can help make sure your children are financially secure. To find out how our life insurance and financial products can help with your family’s financial security, click on the “Talk to Us” button.
This material is for informational purposes only. Neither New York Life nor its agents provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.