Planning your estate through a will is a process that you should approach with time and consideration. These six questions could help you avoid some common and serious mistakes.
1. Do you think that only rich people need a will?
Protecting your assets through an estate plan will avoid delays and expenses that reduce the size of your estate.
2. Do you think you only need a will if you have dependents?
Again, anyone needs a will if they want to have a say in who receives the things they own. A will reduces delays, reduces probate costs (the legal process of proving a will is authentic) and other costs, and can minimize estate taxes.
3. Do you believe the state will take care of everything for you?
If you die intestate (without a legal will), you have no way of ensuring your assets will be distributed as you would like — you give the state where you live the right to decide who will receive your money and possessions — and assets may go to heirs that you had no intention of providing for.
Since state law can’t provide for every possibility, your assets will be distributed through a one-size-fits-all plan: usually children receive equal amounts, and there are no provisions for special gifts for friends or favorite charities. Preparing a proper will is the only way to ensure that your loved ones are taken care of and that charities are remembered as you wish.
4. Do you need to review your beneficiary designations to keep them up-to-date?
When you establish savings accounts, annuities, life insurance policies, and individual retirement accounts, you may name beneficiaries as part of the process. You should be aware that these named beneficiaries will take legal precedence over any instructions in your will about distributing these assets. When you draft your will, be sure to review all of your assets will go where you want, and will benefit the people and/or organizations of your choice.
You should review your plans periodically because life happens, and things change. Tax laws change. Beneficiaries or executors may die before you do. Estate values grow or shrink. Children grow up, or marry, or go to college. Family members divorce. Friends become estranged. Charitable wishes may change when you form connections to new causes.
A periodic review of your will ensures that your estate plan continues to match your current circumstances.
5. Are you too young to need a will?
This was a trick question!. Actually, this is when you need a will the most. A properly drafted will is your way to provide detailed instructions for the care of young children, and provides you with the foundation you need to build a strong financial future. You can always update your will as needed to reflect changes in your situation.
6. Can you just leave everything to your spouse?
This seems like the obvious choice for many people, but there are a few issues to consider:
- If an accident claims you and your spouse at the same time, the state may be in control of distributing your assets.
- If your spouse is not the parent of your children, even if you both agree on what to do with your property upon your death, there is always the possibility that unintended beneficiaries may receive your property.
- Your spouse may not feel the same way you do about an heir or charity. This may mean that bequests you would like to make go unfulfilled.
Many of the changes you might want to make to update your will don’t require writing an entirely new document. In fact, many can be handled by using a codicil (or amendment) to your will. Your codicil is then attached to your original will, and will be executed with your will.
Ensuring that you have an up-to-date will should be on your to-do list. If you already have a will, we encourage you to review it every five years, or after any significant event — marriage, birth of a child, death of an heir, interest in a new charity, loss of a special friend, relocation or acquisition of a major asset.