Planning for the future means more than just saving for retirement or adding a few bucks to your child’s college fund. While it’s probably the last thing you want to think about, making sure your family is financially prepared for your death is just as important. There are several elements that go into forming a solid estate plan but a last will and testament is the most basic. If you don’t have a will, here are a few key points to keep in mind when making one.
Consider working with a financial advisor as you create or update your estate plans.
Find out now: How much do I need to save for retirement?
What a Will Does
In the simplest terms, a will is a legal document that spells out how you want your assets to be divided after you’re gone. This could include larger assets like your home or something of lesser value, like a family heirloom or personal possessions. In addition to distributing your property, you can also use a will to specify who will act as legal guardian for minor children.
Elements of a Will
The laws for making a will vary from state to state but they generally must meet the same basic requirements. You have to be at least 18 and of sound mind to make one; the age limit in certain states is lower if you’re legally married. Depending on the state you live in, your will should be either typed or handwritten. Some states also allow oral or videotaped records.
The person who makes the will is called the testator and the person who makes sure it’s carried out is called the executor. Once the will is complete, it needs to be witnessed by at least one adult who’s also of sound mind. In some states, you also have to have the will notarized and file a copy with your local probate court.
What to Include in a Will
What instructions you leave in your will ultimately depends on your financial situation. In addition to naming someone to serve as your executor, you’ll also want to include the names and ages of everyone you want to designate as a beneficiary. This means your spouse, children, siblings and anyone else you want to leave part of your assets to. If necessary, you should also name your children’s guardian.
The next step is dividing your property. This is relatively easy if you’re planning to leave everything to your spouse and/or children. If you have specific gifts you want to make you’ll need to identify who will receive each asset. This includes gifts to individuals as well as any charitable donations you’d like to set up. You can also use your will to cancel any outstanding debts owed to you.
Limitations on Wills
While wills offer you a broad range of legal rights protections there are certain things a will can’t do. For instance, you can’t use a will to disinherit a surviving spouse or otherwise prevent them from inheriting any assets that are entitled to them under the law. You can, however, use a will to exclude an adult child from inheriting any part of your estate.
A will also won’t protect you in the event that you become incapacitated and aren’t able to manage your finances. In this type of situation, the court may step in and appoint someone to act as conservator on your behalf. Setting up a living trust in addition to a will can help you avoid conservatorship but a trust is slightly more complicated than a will.
You also won’t be able to sidestep probate with just a will alone. Probate is the legal process through which your will is verified, your assets are inventoried and distributed to your heirs and your estate’s debts are paid. If you have a larger estate or your beneficiaries are challenging the terms of the testament, probate can drag on for months or even years, adding up to some hefty costs.
Having a will in place is a smart move if you’re worried about what will happen to your family and your assets after you’re gone.
While a will is not the only tool you’ll need to complete your estate plan, writing one is an important first step in the right direction.
Tips on Estate Planning
- Estate planning can be complicated, sometimes even confusing, and yet it is extremely important. A financial advisor can offer insight and guidance for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Be sure to check out our Estate Planning Guide to find valuable resources.
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