Your Will: The Most Basic Estate Planning Tool

| August 2, 2016 | 0 Comments

According to an April 2016 article in USA Today, a recent survey found that 64 percent of adult Americans do not have a will. In 2007, a similar study found that young parents with minor children were the least likely to have taken this important step. While few young adults expect to die early, it does happen, and if you aren’t prepared it can leave a real mess behind for your family to deal with. Fortunately, a will is the easiest and most basic estate planning tool.

A will is a legal document that details how you want your assets distributed at your death (after debts and taxes are paid), and who should oversee your affairs. If you have minor children, your will should state who is to care for them.

Without a will, state laws will determine how your property is distributed. Your spouse, children or other heirs could end up with less than you planned, the assets could be poorly managed, and your estate could end up paying more in taxes and legal fees than necessary. Also, without a will to guide it, the court could appoint someone whom you would not approve as guardian for minor children.

Although writing your own will can save money, an improperly drafted or executed will might lead the court to reject it as invalid or allow disgruntled heirs to challenge it. Or you may simply forget to include something important. Also, each person’s circumstances are very different so a handwritten or template will, while better than nothing, leaves much to be desired. State laws also vary significantly, so the will must reflect the particulars of that state. An attorney who specializes in estate planning can help you prepare a will that covers all the bases and complies with local customs.
As you are preparing your will, here are some key issues to keep in mind:

Some assets are not governed by your will. These include life insurance, retirement accounts or property held in joint tenancy with right of survivorship, or those owned by a trust. For example, if your will says your wife is to receive your entire estate, but your mother is still the named beneficiary of a life insurance policy, your mother will get the insurance benefits.

Choose a guardian carefully in the event you and your spouse die together. The court will likely have to approve the guardian, but at least you’ll have your input, rather than the court picking someone. Make certain the guardian is willing and able to care for your children. Also be certain your guardian has the financial resources (or that you provide the resources) to raise your children; your guardian is not legally obligated to pay for the care of your children out of their pockets. Also, name a contingent guardian as backup.

Choose your executor carefully. An executor is the one who actually makes things happen and settles your estate, making sure debts and taxes are paid, and assets are properly transferred. You should choose someone who is willing, trustworthy and capable. Name a backup executor, too. It is especially important to ensure the executor has the power to carry out your will, such as the ability to sell real estate.

Take care with valuable heirlooms. A separate letter of instruction may be used to designate precisely who is to receive personal property of high sentimental value but little monetary value. This can minimize a lot of squabbling among heirs. Keeping this kind of detail out of the will reduces the cost of rewriting the will each time you decide to make changes.

Keep it up to date. Review and (if necessary) revise the will when key events occur, such as the birth of a child, changes in circumstances of guardians, a marriage or divorce, the death of an heir or executor, retirement, or a move to another state.

This column is prepared by Rick Brooks, CFA®, CFP®. Brooks is director and chief investment officer with Blankinship & Foster, LLC, a wealth advisory firm specializing in comprehensive financial planning and investment management. Brooks can be reached at (858) 755-5166, or by email at Brooks and his family live in Mission Hills.

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