Most people spend August manning the grill or hitting the beach. However, August is also “National Make a Will” month. Although the month is now coming to a close, it’s not too late to start thinking about planning your will.
People tend to think planning a will is morbid, but it’s actually about life and making sure that your assets provide support for the people you love. It isn’t about controlling from the grave, it’s about creating opportunities that continue to give benefit for years to come.
According to a recent Gallup poll, only 44% of Americans have a will. Are you one of the majority who doesn’t have one?
Sometimes the vernacular regarding these types of conversations can become confusing. What’s the difference between a last will and testament versus a living will versus an estate plan vs a trust?
Very simply put – and from a 35,000-foot level – here is how to distinguish them:
- An estate plan is more comprehensive than your will – in fact, both a last will and testament and a living will are usually part of the estate plan. First, an estate plan identifies the people you want to benefit from your assets. Second, an estate plan identifies the people you trust to take care of yourself and your assets if you’re unable to do so.
- A last will and testament is a legally binding document that distributes your assets and assigns heirs and guardians after your death.
- A living will (aka an advanced directive) is a document that grants trusted advisors to navigate financial and health decisions should you become incapacitated.
- A trust can also be part of an estate plan, and is a legal entity you set up to hold, safeguard, distribute and control all your assets.
Creating a Will
If you don’t have a will, now is the time to create one. There are ways you can DIY the task by purchasing forms online, especially if you don’t have too many complex factors to consider.
Digital wills are becoming more popular these days; however, if you don’t want to use an online service to store your documents and if you don’t have extensive assets, you can create a will online inexpensively and then print your documents and store them in a place where your family members could find them. You could also leave them with your attorney and make sure your family members know the name of your attorney. Be sure to list any important passwords or other information your family should know should something happen to you.
If you have more complex finances, you will likely want to consult a financial advisor or estate attorney to draft one. Wills can get complicated and you want to ensure you’re intentions are honored the way you want them to be once you pass.
Components of a Will
You will want to designate a guardian for your children if something happens to you and your spouse. Even if you don’t have children, you should also compile a complete list of your assets, financial accounts, credit cards, investments and debt that will be easily accessible to the surviving spouse, family member, or trustee. This will make it easier to locate and distribute assets according to your wishes. You’ll also want to review beneficiaries on any retirement and life insurance accounts.
Most states require the following for your will to be valid:
- You should be at least 18 years old
- You should be of “sound mind”
- You will need to include what you want done with your assets and property, and if you have minor children, include who will become guardian
- Usually wills are typed or generated by a computer (handwritten wills have different provisions), and should include the statement that this document is your will
- You should appoint an executor who will ensure your estate is distributed correctly according to your will
- You should have at least two witnesses who will see you sign the will, are 18 years or older, are not beneficiaries of your will, and will also sign the will
Updating Your Will
Most people draft their will around a major life event like getting married or having a child – but then they don’t update it as their life progresses. More children, grandchildren, deaths or divorce are just some of the life events that can change the will’s original intent.
If you have a will, have you updated it lately and have you done it in a way that will avoid conflict for the rest of the family? Is there a plan to distribute assets in a way that won’t cause more grief after you are gone? You may want to consider the number of beneficiaries you have, or whether there are grandchildren to whom you wish to bequeath your property. Do you have a plan in the event that you and your spouse pass at the same time? An estate planning attorney and a financial advisor – even if there isn’t a trust involved – can be great resources.
Not having an updated will relevant to your current situation can cause strife within an already grieving family. Double-check your will on a regular basis to make sure it’s written the way you want on your current circumstances.
If You Don’t Have a Will
If you die without a will, the intestacy laws of your state will determine what happens to your property and assets. Typically, your spouse (domestic partner in some states) or children will be the first to inherit your assets; if you are not married and don’t have children, then other relatives may be the recipient of your estate. No relatives? The state usually receives your assets and property in that case. If you are not married, but have a long-term partner, then not having a will that clearly states how you intend your assets to be distributed can mean your final wishes will be ignored. Since intestacy laws usually only recognizes relatives, you will want to clearly state your intentions in a will. The laws of succession vary based on what state you live in, so make sure you check to see what the laws are – or better yet, make sure you have a will.
Death and dying are never fun subjects, but not having a will can make them even more dismal. Creating a will allows your wishes to be clearly stated, and it helps your beneficiaries divide your assets and take care of any outstanding debts. As National Make a Will Month ends, use this time to understand the importance of having a will and take the steps to either create or update one.