- A will can ensure that your final wishes are carried out and provide peace of mind
- Comprehensive estate planning includes a will and advanced directives that designate someone to make financial and healthcare decisions if you’re incapacitated
- Wills can be written without a lawyer, but keep in mind that may mean no access to personalized legal advice
- Some assets, such as life insurance policies, have designated beneficiaries that override a will
- Without a will, the state will decide who gets your assets; that may not match your wishes
Who will make critical medical and financial decisions for you if you can’t—say, because you’ve been in an accident? What will happen to all of your assets when you die? Who will get the proceeds from your life insurance?
These questions are why having a will and other estate planning are so important. The good news is that once you’ve made decisions about everything you own, the actual will preparation process can be pretty simple.
What is a will?
A simple will, sometimes called a last will and testament, is a document that outlines what will happen to everything you own when you die.
It can list major assets, such as property, vehicles, artwork, and other valuable items, and even sentimental things, like that painting of you on a horse your parents commissioned when you were six.
Some items, such as the proceeds from life insurance, can pass on to heirs without a will. Also, depending upon how it's titled, some property may be inherited outside of a will. But without a will, what happens to your assets may not match your wishes.
Why is a will so important?
If you die without a will, two things that you don’t want will happen:
- The state, as a judge, will decide who inherits your assets, based on the state's intestacy(died without a will) laws.
- Your family may be conflicted over who gets what, which can cause significant conflict.
There are many cases when an asset was verbally promised to a friend or family member, but there was nothing in writing.
For example, a parent may have promised their home to an adult child—their primary caregiver—but when the parent died, other adult children argued that the home should be sold and the proceeds divided equally.
These sorts of conflicts have the potential to split a family apart.
If someone dies without a will, known as intestate, unless assets have named beneficiaries or are held in a trust, most assets will be divided up by a judge with no knowledge of the family.
Regulations vary by state, but in general only spouses, registered domestic partners, and blood relatives will inherit assets.
Unmarried partners, friends, and charities will get nothing. However, if the deceased person is married, the surviving spouse will usually get the largest share.
If there are no children, the surviving spouse may get everything. If no relative can be found, the state takes the assets.
Most of us don’t want that. So here’s what to do.
How to create a will
Creating a will may involve emotional hurdles, but the process isn’t complicated.
Here's how to get started.
1. Make a list of everything significant or sentimental
List the big things, such as your home, vehicle, and other items of value. Items with strong sentimental value, such as jewelry, artwork, etc. should also be included. Remember that in most cases, you can only bequeath (pass on) assets you own in their entirety; most assets owned jointly with someone else, such as a spouse, can’t be left to a third party.
2. Decide who gets what
Make sure you have contingent beneficiaries in case your spouse, child, or another heir predeceases you. If you leave assets to an adult child who predeceases you, for example, do you want those assets to go to their children or someone else?
3. Choose a personal representative
Someone will have to make sure your wishes are carried out. That person doesn’t have to be a professional but should be someone you trust.
4. Choose a guardian for your children
If your children are minors, who will take care of them? Once they become adults, this portion of your will becomes null and void.
5. Choose someone to manage your children’s assets
If your children are minors, name someone to manage their inheritance. This does not have to be the same person you name as their guardian. To ensure that person has the proper authority, you have three options:
- Name that person to be a property guardian.
- Designate them as a property custodian under a law called the Uniform Transfers to Minors Act (UTMA).
- Make them a trustee of your child’s trust (more on that below).
6. Write your will
Most people hire a lawyer to make their estate plan, and this is generally the best option if you need or want personalized legal advice and can afford it.
Some states (California, Maine, Michigan, New Mexico, and Wisconsin) provide a standard statutory form you can use if you’re a legal resident of that state. However, keep in mind that these forms are for simple estates and don’t come with any advice.
You can also make a will using do-it-yourself software or services like Nolo's Quicken WillMaker. This option can save time and money if you have a relatively simple estate.
7. Sign and store your will
Sign your will in front of witnesses and also have them sign it. Make sure your signature is notarized as well. Then, store your original copy in a safe place, such as a safe deposit box.
What isn’t in your will
Not every asset needs to be named in your will. For example, if you’ve named a beneficiary for your life insurance, bank accounts, or other assets, those don’t belong in your will.
And remember that no matter what your will says, designated beneficiaries receive those assets. So make sure you review life insurance policies and bank accounts periodically, so they don’t go to a former spouse.
Make your estate planning more comprehensive
Besides a will, your estate planning should include two other documents:
- Durable (or financial) power of attorney (FPOA): names someone to handle your financial matters, such as paying bills, debts, and taxes, should you become incapacitated.
- Advanced Medical Directives: also called a living will, Healthcare Power of Attorney (HCPOA) or healthcare proxy, allows someone else to make healthcare decisions on your behalf if you’re unable. It can also designate that you do or don’t want certain end-of-life medical treatment, such. Some states have all the documents separated (HCPOA + Living Will + HIPAA authorization); others combine them into one document.
Depending upon your situation, you may also want to talk to an attorney about creating a trust or setting up other mechanisms to leave your assets to heirs or organizations. This can streamline the process of distributing your assets, keep certain financial information private, and sometimes offer tax benefits.
Having estate planning in place, especially financial and medical powers of attorney, can not only ensure that your wishes are carried out, but protect you in the event you’re incapacitated. They can also avoid family conflict: you don’t want family members trying to guess what you would have wanted.
A CFP® Professional at Facet can connect you to the Facet resources you need to help you build an estate plan that protects you and your loved ones, minimizes taxes, and ensures that your final wishes are fulfilled.