Wills Handout


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Wills Handout

  1. 1. From: http://estate.findlaw.com/estate-planning/wills/wills- types.html Wills: An Overview Wills are the most common way for people to state their preferences about how their estates should be handled after their deaths. Many people use their wills to express their deepest sentiments toward their loved ones. A well-written will eases the transition for survivors by transferring property quickly and avoiding many tax burdens. Despite these advantages, many estimates figure that at least seventy percent of Americans do not have valid wills. While it is difficult to contemplate mortality, many people find that great peace of mind results from putting their affairs in order. Wills vary from extremely simple single-page documents to elaborate volumes, depending on the estate size and preferences of the person making the will (the "testator"). Wills describe the estate, the people who will receive specific property (the "devisees"), and even special instructions about care of minor children, gifts to charity, and formation of posthumous trusts. Many people choose to disinherit people who might usually be expected to receive property. For all these examples, the testator must follow the legal rules for wills in order to make the document effective. Will Requirements Formal requirements for wills vary from state to state. Generally, the testator must be an adult of "sound mind," meaning that the testator must be able to understand the full meaning of the document. Wills must be written. Some states allow a will to be in the testator's own handwriting, but a better and more enforceable option is to use a typed or pre-printed document. A testator must sign his or her own will, unless he or she is unable to do so, in which case the testator must direct another person to sign the will in the presence of witnesses, and the signature must be witnessed and/or notarized. A valid will remains in force until revoked or superseded by a subsequent valid will. Some changes may be made by amendment (called a "codicil") without requiring a complete rewrite. Will Limitations Some legal restrictions prevent a testator from giving full effect to his or her wishes. Some laws prohibit disinheritance of spouses or dependent children. A married person cannot completely disinherit a spouse without the spouse's consent, usually in a pre- nuptial agreement. In most jurisdictions, a surviving spouse has a right of election, which allows the spouse to take a legally-determined percentage (up to one-half) of the estate when he or she is dissatisfied with the will. Non-dependent children may be disinherited, but this preference should be clearly stated in the will in order to avoid confusion and possible legal challenges.
  2. 2. Some property may not descend by will. Property owned in joint tenancy may only go to the surviving joint tenant. Also, pensions, bank accounts, insurance policies and similar contracts that name a beneficiary must go to the named party. Appointing a Representative A will usually appoints a personal representative (or "executor") to perform the specific wishes of the testator after he or she passes on. The personal representative need not be a relative, although testators typically choose a family member or close friend, as well as an alternate choice. The chosen representative should be advised of his or her responsibilities before the testator dies, in order to ensure that he or she is willing to undertake these duties. The personal representative consolidates and manages the testator's assets, collects any debts owed to the testator at death, sells property necessary to pay estate taxes or expenses, and files all necessary court and tax documents for the estate. Choosing a Guardian Testators who have minor or dependent children may use a will to name a guardian to care for their children if there is no surviving parent to do so. If a will does not name a guardian, a court may appoint someone who is not necessarily the person whom the testator would have chosen. Again, a testator usually chooses a family member or friend to perform this function, and often names an alternate. Potential guardians should know they have been chosen, and should fully understand what may be required of them. The choice of guardian often affects other will provisions, because the testator may want to provide financial support to the guardian in raising surviving children. When No Valid Will Exists If a person dies without a valid will and did not make alternative arrangements to distribute property, survivors may face a complicated, time-consuming, and expensive legal process. Dying without a will leaves an estate "intestate," and a probate court must step in to divide up the estate using legal defaults that give property to surviving relatives. The court pays any unpaid debts and death expenses first, then follows the legal guidelines. The rules vary depending on whether the deceased was married and had children, and whether the spouse and children are alive. If the intestate individual has no surviving spouse, children, or grandchildren, the estate is divided between various other relatives. Therefore, intestacy may mean that people who would never have been chosen to receive property will in fact be entitled to a portion of the estate. Additionally, state intestacy laws only recognize relatives, so close friends or charities that the deceased favored do not receive anything. If no relatives are found, the estate typically goes to the state or local government. Intestacy also poses a heavy tax burden on estate assets. When made aware of the consequences of intestacy, most people prefer to leave instructions rather than subject their survivors and property to government-mandated division.
  3. 3. If You Don't Have a Will, the State Will Make One for You If you die before making a will, the "descent and distribution" laws of the state in which you reside become your will. Although descent and distribution laws vary from state to state, they generally result in the surviving spouse's financial activities being restricted where there are children of the marriage and no efforts being made to save on estate taxes. If you do not have a valid will, these laws may mean the following: Who Gets Your Money • Instead of giving your entire estate to your surviving spouse, the state may give your spouse only a third of your estate, with the other two-thirds going directly to your children. • Your spouse may have to make a yearly report of how he or she is managing any money the state grants to your underage children until they come of age. • Your spouse may have to post a bond to guarantee that he or she will responsibly manage the money the state grants to your underage children. • Your spouse may be asked by your children (when they come of age) to account for all transactions with their money. • When your underage children come of age, they may receive all of the money granted to them by the state in a lump sum, even if they're not ready for that type of responsibility. Who Cares for Your Children • If both you and your spouse die without a will and your children are minors, the state may decide who will be your children's guardian regardless of your wishes. Your family could end up in court fighting over the kids, or they could end up with a stranger. Your Spouse's Future Remarriage • If your spouse remarries after your death, his or her new spouse may be entitled to an interest in the assets from your estate. • The new spouse will not be legally required to use those assets for the benefit of your children. • When the new spouse dies, his or her interest in your estate assets becomes part of his or her estate to deal with in a will or trust as he or she desires. He or she will not be required to leave any of those assets to your children. Your Children's Special Needs • If any of your children have special needs, or if you give any of your children "advances" against their inheritance, the state will not consider those circumstances in dividing up your estate. Family Heirlooms
  4. 4. Instead of going to specific family members, your family heirlooms may be divided up, with one-third going to your spouse and two-thirds to your children. If the family cannot agree, the court can have the heirlooms sold and divide the proceeds. The court will not consider any oral promises you made to specific family members about individual items. Probate • Your estate will be forced to go through probate, even if you could have avoided it easily with estate planning before your death. • If probate and attorney fees pose a financial hardship for your spouse, he or she can only ask the court for an advance against the estate. Estate Taxes • If you do not have an estate plan, you may be liable for the maximum tax to be levied against your estate, leaving less for your family. Kinds of Wills Here's a brief glossary of terms used in the law for various kinds of wills: Simple will. A will that just provides for the outright distribution of assets for an uncomplicated estate. Testamentary trust will. A will that sets up one or more trusts for some of your estate assets to go to after you die. Pourover will. A will that leaves some of your assets in a trust that you had already established before your death. Holographic will. A will that is unwitnessed and in the testator's handwriting. About 20 states recognize the validity of such wills. Oral will (also called nuncupative will). A will that is spoken, not written down. A few states permit these. Joint will. One document that covers both a husband and wife (or any two people). These are often a big mistake and are especially inadvisable for estates larger than $675,000. Living will. Not really a will at all--since it has force while you are still alive and doesn't dispose of property--but often executed at the same time you make your will. Tells doctors and hospitals whether you wish life support in the event you are terminally ill or, as a result of accident or illness, cannot be restored to consciousness.
  5. 5. ABA Guide to Wills and Estates Copyright 1999, 2000, 2002 American Bar Association Advantages of Various Estate Planning Tools There are a lot of estate planning tools available to you. The following table summarizes the benefits provided by some of the more common estate planning techniques. Talk to your estate planning attorney for the details. (Note: For definitions of the estate planning tools compared in this table, i.e. "Pour-Over Will", scroll to the bottom of this page) Benefit of Planning Tool No Basic Pour- Living AB QTIP Will Will over Will Trust Trust Trust Selectivity Permits you to select the No Yes Yes Yes Yes Yes beneficiaries of your estate Permits you to select the No Yes Yes Yes Yes Yes executor of your will Permits you to select the No No Yes Yes Yes Yes trustees of your trust Permits you to select the No Yes Yes Yes Yes Yes guardians for your children Probate Avoids the time- No No No Yes Yes Yes consuming and expensive probate process Timing of Distributions Permits distribution of No No Yes Yes Yes Yes assets to children other than simply upon reaching the age of majority (Ex. 1/3 at age 25, 1/3 at age 30, 1/3 at age 35)
  6. 6. Protection Prevents conservatorship No No No Yes Yes Yes of estate owner Protects assets from No No No Yes Yes Yes creditors Estate Taxes Assists married couples in No No Possibly, No Yes Yes reducing estate taxes if properly designed to save estate taxes Allows the first spouse to No No Yes No No Yes die to name the ultimate beneficiaries of his/her estate while still permitting the surviving spouse to utilize the assets and while still deferring estate taxes No Will means you have no will, and your estate passes to your heirs based on the laws of descent and distribution of your state. Basic Will means you have a will that distributes everything to your spouse, if living, otherwise to your children when they reach the age of majority. Pour-over Will means you have a will that distributes everything to a trust. Living Trust means a trust designed to avoid probate and provide asset management. A basic living trust does not effectively use the $675,000 unified credits of both spouses. Remember, each person is entitled to have the first $675,000 of his or her estate pass to his or her heirs without estate taxes. This is referred to as the "unified credit." Because of this deficiency of a basic living trust, an AB Trust is often recommended instead to married couples with substantial assets. AB Trust means a trust designed to make sure the $675,000 unified credit of each spouse is used to the full extent possible, while allowing the surviving spouse to have the use of the assets of the deceased spouse during the remainder of the surviving spouse's lifetime. QTIP Trust means a trust designed to permit a spouse to transfer assets to his/her trust while still maintaining control over the ultimate disposition of those assets at the spouse's death. QTIP Trusts are particularly popular in situations where a person is married for a
  7. 7. second time but has children from a first marriage for whom he/she wants to reserve assets.
  8. 8. From: http://www.nolo.com/article.cfm/ObjectID/10689FA1-E24C-4849- BEA73FE77F295A5F/catID/F251EA55-13A9-4EE0-85D21CEB27636030/3 09/298/FAQ/ What happens if I die without a will? If you don't make a will or use some other legal method to transfer your property when you die, state law will determine what happens to your property. Generally, it will go to your spouse and children or, if you have neither, to your other closest relatives. If no relatives can be found to inherit your property, it will go to the state. In addition, in the absence of a will, a court will determine who will care for your young children and their property if the other parent is unavailable or unfit. If you are part of an unmarried same-sex couple, your surviving partner will not inherit anything unless you live in one of the few states that allows registered domestic partners to inherit like spouses: California, Connecticut, Maine, New Jersey, and Vermont. What makes a will legal? Do I need a lawyer to make my will? Any adult of sound mind is entitled to make a will. Beyond that, there are just a few technical requirements a will must fulfill: • The will must be signed by at least two, or in Vermont, three, witnesses. The witnesses must watch you sign the will, though they don't need to read it. Your witnesses, in most states, must be people who won't inherit anything under the will. (If your state allows "holographic" wills, you don't need witnesses.) • You must date and sign the will. You don't have to have your will notarized. In many states, though, if you and your witnesses sign an affidavit (sworn statement) before a notary public, you can help simplify the court procedures required to prove the validity of the will after you die. You do not have to record or file your will with any government agency, although it can be recorded or filed in a few states. Just keep your will in a safe, accessible place and be sure the person in charge of winding up your affairs (your executor) knows where it is.
  9. 9. You are not required to have lawyer draft a will for you, and most people do not need a lawyer's help to make a basic will -- one that leaves a home, investments, and personal items to your loved ones, and, if you have young children, that names a guardian to take care of them. Creating a basic will rarely involves complicated legal rules, and most people can create their own will with the aid of a good software program or book. But if you have questions that aren't answered by the resource you're relying on, or your situation is unusual, it may be worth it to see a good lawyer. I don't have much property. Can't I just make a handwritten will? Handwritten, unwitnessed wills, called "holographic" wills, are legal in about 25 states. To be valid, a holographic will must be written and signed in the handwriting of the person making the will; in some states it must also be dated. Some states allow you to use a fill-in-the-blanks form if the rest of the will is handwritten and the will is properly dated and signed. A holographic will is better than nothing if it's valid in your state. But a will signed in front of witnesses is better. If a holographic will goes before a probate court, the court may be unusually strict when examining it to be sure it's legitimate. And if you don't have guidance -- from a good self-help resource or a good lawyer -- it's easy to write something that turns out to be ambiguous or even contrary to what you intended. Can I use my will to name a guardian to care for my young children and manage their property? Yes. If both parents of a child die or become otherwise unable to care for a minor child, another adult -- called a "personal guardian" -- must step in. The personal guardian will be responsible for raising your children until they become legal adults. You and the child's other parent can use your wills to nominate someone to fill this position. To avert conflicts, you should both name the same person. For more information, see Choosing a Guardian for Your Children. You can choose that same guardian to manage property that you leave to your minor children or you can name someone different. You can name a "property guardian," a "custodian", or a "trustee" to manage the property: • Name a property guardian. You can simply name a property guardian to manage whatever property the child inherits, if there's no other mechanism (a trust, for example) to handle it. The guardian will manage the property until the child reaches the age of 18. • Name a custodian under the Uniform Transfers to Minors Act (UTMA). In every state except South Carolina and Vermont, you can choose a custodian to manage property you are leaving to a child. The custodian will step in to manage the property until the child reaches the age specified by your state's law -- 18 in a few states, 21 in most, 25 in several others.
  10. 10. • Set up a trust for each child. You can use your will to create a trust for any property the child inherits and to name a trustee to handle the trust property until the child reaches the age you specify. • Set up a "pot trust." If you have more than one child, you may want to set up just one trust for all of them. This arrangement is usually called a pot trust. You name a trustee to decide what each child needs and to spend money accordingly. Must I leave something to my spouse and children? Disinheriting spouses. The law protects surviving spouses from being left with nothing. If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin -- or Alaska if you have made a written community property agreement), your spouse automatically owns half of all the property and earnings (with a few exceptions) acquired by either of you during your marriage. You can leave your half of the community property, and your separate property, to anyone you choose. In all other states, a surviving spouse has a legal right to claim a portion of your estate, no matter what your will provides. But these provisions kick in only if your spouse goes to court and claims that share. If you don't plan to leave at least half of your property to your spouse, either through your will or outside it, you should consult a lawyer -- unless your spouse willingly consents in writing to your plan. Disinheriting children. Generally, it's perfectly legal to disinherit a child. If, however, it appears that you didn't mean to disinherit a child -- the most common example is a child born after you made your will -- then the child has the right to claim part of your property. Can someone challenge my will after I die? Very few wills are ever challenged in court. When they are, it's usually by a close relative who feels somehow cheated out of a share of the deceased person's property. To get an entire will invalidated, someone must go to court and prove that it suffers from a fatal flaw: the signature was forged, you weren't of sound mind when you made the will, or you were unduly influenced by someone. What You Can't, or Shouldn't, Do in Your Will Wills aren't the place to handle certain kinds of property or issues. Wills are wonderful, simple, inexpensive ways to address many people's estate planning needs. But they can't do it all. Here are some things you shouldn't expect to accomplish in your will.
  11. 11. Leave Certain Kinds of Property You can't use your will to leave: • Property you hold in joint tenancy with someone else (or in "tenancy by the entirety" or "community property with right of survivorship" with your spouse). At your death, your share will automatically belong to the surviving co-owner. A will provision leaving your share would have no effect unless all co-owners died simultaneously. • Property you've transferred to a living trust. • Proceeds of a life insurance policy for which you've named a beneficiary. • Money in a pension plan, individual retirement account (IRA), 401(k) plan, or other retirement plan. Instead, name the beneficiary on forms provided by the account administrator. • Stocks or bonds held in beneficiary (transfer-on-death or TOD) form. If you want to change the beneficiary, contact the brokerage company. • Money in a payable-on-death bank account. If you want to name a different beneficiary, just fill out a simple form at the bank. Leave Funeral Instructions Wills are typically not read -- or even found -- until days or weeks after a death. That's too late to be of help to the people who must make immediate decisions about the disposition of a body and funeral or memorial services. Instead, make a separate document spelling out your wishes, and tell your executor where to find it when the time comes. WHAT ARE THE ELEMENTS OF A WILL? What you generally need to make a will: 1) Your name and place of residence; 2) Names and addresses of spouse, children and other beneficiaries, such as charities or friends; 3) Alternate beneficiaries, in the event a beneficiary dies before you do; 4) Name and address of an Executor/ Executrix to manage your estate; 5) Name and address of an alternative Executor/Executrix, in the event your first choice is unable or unwilling to act; 6) Name and address of a guardian for your minor children;
  12. 12. 7) Name and address of an alternative guardian, in the event your first choice is unable or unwilling to act; 8) The age you wish your minor children to have control of their inheritance; 9) Any burial requests you may have (cremation, where you want to be buried, etc.); 10) Your signature; 11) Two Witnesses' signatures; and 12) Notarization. Two of the most important items included in your will are naming a guardian for minor children and naming an Executor/ Executrix. WHAT IS A GUARDIAN? In most cases, a surviving parent assumes the role of sole guardian. However, it's important to name a guardian for minor children in your will in case neither you nor your spouse is able and willing to act. The guardian you choose should be over 18 and willing to assume the responsibility. Talk to the person ahead of time about what you are asking. You can name a couple as co-guardians, but that may not be advisable. It's always possible the guardians may choose to go their separate ways at some later date, and, if so, a custody battle could ensue. If you do not name a guardian to care for your children, a judge will appoint one, and it may not be someone you would have chosen. WHAT IS A EXECUTOR/EXECUTRIX AND WHAT DO THEY DO? An Executor/Executrix is the person who oversees the distribution of your assets in accordance with your will. Most people choose their spouse, an adult child, a relative, or a friend to fulfill this duty. If no Executor/Executrix is named in a will, a Probate Judge will appoint one. Probate refers to the legal procedure for the orderly distribution of property in a person's estate. The Executor/Executrix files the will in probate court, where a Judge decides if the will is valid. If it is found to be valid, assets are distributed according to the will. If the will is found to be invalid, assets are distributed in accordance with state laws. Responsibilities usually undertaken by an Executor/Executrix include: --Paying valid creditors; --Paying taxes; --Notifying Social Security and other agencies and companies of your death;
  13. 13. --Canceling credit cards, magazine subscriptions, etc.; and --Distributing assets according to the will. http://ezinearticles.com/?Frequently-Asked-Questions-About-Wills,-Living-Wills-and- Powers-of-Attorney&id=20323