What is a ” Last Will and Testament” and why do you need one?
A last will and testament is a document that, simply put, provides instructions on where you want your assets to go at your death. Wills can be very basic and short or long and complicated. The contents of your will are dictated by the size of your estate, your wishes, the type of property you own and a variety of other instructions. From the outset, it is critical that you understand two things: 1. Certain assets do not pass using the probate process. We call them non- probate-able assets. Non-probate-able means these assets will NOT follow the instructions of your will and 2. Minors can not inherit property and if assets are left without proper planning, chaos will result. Non-probate-able assets include 401ks, IRAs, joint property, life insurance, and annuities. One other class of assets includes accounts with a “payable on death clause”. Therefore, before you can even begin to write a will you must know what assets will pass according to the will and which ones will not. For example, if your house is owned jointly with your spouse, your spouse is the primary beneficiary of your retirement plans, it may be that the vast majority of your estate will go directly to your spouse. This DOES NOT mean that you do not need a will. You most certainly will leave some assets that are subject to probate and your spouse could pre-decease you or die in a common accident.
One reason this probate/non-probate issue is so important is because many people believe that all their assets will pass to their spouse if that is what their will says. One example of how this can be problematic is to consider an individual in a second marriage. The will maker may believe their new spouse will get everything due to the wording of their will but forgot to change the beneficiary designation of their life insurance policy. This happens frequently.
Another issue that often arises involves a person with children from another marriage. If their will leaves everything to their spouse, they will unintentionally disinherit their own heirs. This leads us to the basic construction of a will. The first step is to decide who gets what, either by making specific bequests or by percentages. The next step is to create a trust for any minors who may become a beneficiary. Even if your children are grown, the default is such that any surviving children (your grandchildren) would get their share.
It is safer to add a trust than not and adds no expense, however you must choose a trustee to manage the trust and make distributions from it. The next step is to name an executor. This is normally a spouse, but can be anyone you want to carry out the wishes outlined in your will. You may give specific instructions to your executor like selling property or stocks before making a distribution, paying certain debts and not paying others etc. The last step is to name a guardian for any minor children, biological or adopted.
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