FOR EDUCATIONAL PURPOSES ONLY

WILLS

Do states or does the federal government regulate wills?

Wills are regulated by the state governments, not the federal government. As a result, what constitutes a valid will in some states means nothing in another. Because there is no national uniform law regarding wills, you need the help of a lawyer, paralegal or at least a will-making computer program when preparing a will of your own.

What is probate?

Any property that is transferred by will is subject to probate, which is the legal process of verifying your will through the courts. Probate can be slow and costly. That’s why many people choose to create a living trust to convey most of their property to their loved ones. Forming a living trust makes sense for just about everyone, but it’s important to realize that it does not prevent probate-it only speeds up the probate process. You still need a will that names an executor for your estate and a guardian for any minor children. All wills must go through probate. Period.

What can be done to cut costs in processing a will?

The processing or "probating" of your will can be expensive. An executor or administrator generally receives a fee for his or her work, which consists of identifying the assets; paying off debts, taxes and administrative costs; and finally, disposing of the remaining assets to the beneficiaries. Usually, an independent executor, such as a lawyer or bank, collects between 2 percent and 5 percent of the estate’s value. If you name a family member to be executor, he or she will usually charge far less than an independent one or may refuse to accept a fee out of love for the family. All fees, which can amount to thousands of dollars, are paid by the estate. You can reduce substantially the cost of probating your will by removing assets from your estate before your death. This can be accomplished by giving away your assets as gifts, holding assets in joint tenancy, entering into certain contractual arrangements, such as life insurance or pensions, and setting up trusts. See your lawyer about these and other estate planning tactics.

What is a holographic will?

A holographic will is a will that is written out in your own handwriting. In many states, holographic wills are automatically invalidated. Even in states where holographic wills are considered valid, they are often contested because either the handwriting or the maker’s wishes are not clear.

Do I need a will, even though I’m single?

Everyone-single or married-needs a will that explains how they want their assets distributed when they die. A will clarifies what you want done with your investments, personal possessions, even your pets. Even if you don’t want to write a will for your own peace of mind, do it for your heirs. The document will save them lots of time, legal and court expenses.

Should I have a will if I don’t have children?

Everyone should have a will, including you and your spouse. Believing that everything the two of you own will pass automatically to the surviving spouse when one of you dies is a risky proposition. Suppose that you and your spouse bought a house or opened a brokerage account as joint tenants several years ago, but the lender or brokerage firm fouled up and mistakenly listed you as tenants-in-common. If you died before the mistake was discovered, your interest in the property would not automatically pass to your spouse. Instead, it would likely become the subject of lengthy probate proceedings and your creditors could ask that the property be liquidated to pay any debts that you left behind. Or, suppose you were killed in an auto accident and the other driver’s insurance company issued a big check to your estate. If you died without a will, the cash would be distributed according to the state’s inheritance laws instead of going directly to your widow. Those same inheritance laws would kick in if you and your spouse died at the same time in a car crash or other accident, which means your combined assets might pass to relatives you don’t even like.

What happens if you don’t have a will?

Everyone has a will. If you don’t write your own, you get the universal will that your state has written for you. All your nearest relatives get a piece of your property, but no one else does-and no one gets more than the state-allotted share, even if it’s unfair. Spouses usually suffer the most. According to Jane Bryant Quinn, author of "Making the Most of Your Money" (Prentice Hall), depending on state law, not all of the property may go to your spouse. Your grown children may get some of the money you meant for your spouse, leaving your spouse with too little to live on. A court will choose your children’s guardian. Stepchildren usually get nothing. Your family might battle with the courts. A fight might break out among your relatives over who gets the children and who runs the inheritance. Whether you do it yourself or with the help of financial advisers, writing a will is key to ensuring that the people you want to leave your property to, get it.

What must be in a will?

Certain elements usually must be present for a will to be valid. You must be of legal age to make a will (this is 18 in most states). You must be of sound mind and memory, which means that you should know you’re executing a will, know the general nature and extent of your property and what the will accomplishes. The will must have a provision that disposes of your property and it must indicate you really intend it to be a will. The will must be voluntarily signed by you (or someone you direct in case of incapacity or illiteracy). Although oral wills are permitted in limited circumstances in some states, wills must usually be written and witnessed. To be safe, don’t hand write a will if you can avoid it. A will must be properly executed, which means that it contains a statement at the end attesting that it is your will, the date and place of signing, and the fact that you signed it in the presence of the witnesses who then also signed it in your presence and watched each other sign.

Where should I keep my will?

Probably the best place to keep the original of your will is with your lawyer. Keep a copy for yourself, and put your lawyer’s name, address and phone number on it so your survivors will know how to contact the attorney when you die. If you don’t want your attorney to have the original of your will, you can keep it at home. Only do so if you have a safe that can’t be broken into, or destroyed by fire. Keeping the original of the will in a bank safe deposit box is OK, but only if your survivors could get to it quickly when you die. Access policies differ from one bank to the next. A survivor can get immediate access if his or her name is on the box rental agreement. If it’s not, the bank may not open it until a tax agent shows up or a court order is presented, either of which could take weeks or even months. An alternative would be to store the original in a safe deposit box held by your executor. The catch: If the executor dies before you do, you’ll have to start looking for a place to store it all over again.

When should I set up a trust? Do I need one at all?

It depends on the size of your estate and the purpose of the trust. For example, if you mainly want a living trust to protect assets from taxes and probate but your estate is under the current federal tax floor ($675,000 for 2001) and small enough to qualify for quick and inexpensive probate in your state, some lawyers would tell you it isn’t worth the cost. However, a trust can do a number of things a will can’t do as well unless the will establishes a trust or pours over into a trust. If you want to avoid a court hearing if you become incompetent or unable to provide for yourself, or if you want to provide for grandchildren, minor children, or relatives with a disability that makes it difficult for them to manage money, a trust has many advantages. If you have a trust, your trustee can manage assets efficiently if you should die and your beneficiaries are minor children or others not up to the responsibility of handling the estate. And a trust can protect your privacy; unlike a will, a trust is confidential.

What is a testamentary trust?

A testamentary trust, sometimes called a death trust, is part of any last will and testament. A testamentary trust does not take effect until the person who made the will dies. As a result, the testamentary trust does not automatically prevent your assets from passing through probate or administration.

What kind of limitations can be put on gifts made in a will?

In general, you can pick who you want your property to go to and leave it in whatever proportions you want. Some people try to make their influence felt beyond the grave by attaching conditions to a gift made in the will (as opposed to the purely advisory language in a letter of intent). According to the American Bar Association, most lawyers advise against this; courts don’t like such conditions, and you’re inviting a will contest if you try to tie them to a gift. For instance, you can’t require your daughter to divorce her no-account husband to claim her inheritance from you; nor can your husband make your inheritance contingent on a promise you’ll never remarry; nor can you force that secular humanist son-in-law go to church every Sunday. For the most part, though, it’s your call.

Most married people plan to leave everything to their spouse, and if the spouse dies first, then it all goes to the children. Why is that a big mistake?

Many married people write a "simple will" that leaves everything to their spouse or, if the spouse dies first, leaves everything to their children. Unfortunately, such a will can cause huge problems later. For example, say John and Mary have two children. John dies, leaving everything to Mary. Mary later marries Bob, a widower with three children of his own. Then Mary dies, leaving everything to Bob. All of John’s assets now belong to Bob, a guy he never met, and John’s children get nothing. And when Bob dies, Bob’s own children will inherit his assets -- which would now include everything that John and Mary had spent their whole lives working for. Check with a good estate planning attorney to answer your estate planning questions in detail. The first half hour is often free and if you take action on the ideas presented, it will be time well spent.

Should two people be appointed as joint guardians of my child?

It’s perfectly legal to name a couple as guardians of your child, but some lawyers and financial experts suggest you name one particular individual instead. Why? "Because couples get divorced, or they can’t agree on how to raise the kids," according to The Five-Minute Lawyer’s Guide to Estate Planning (Dell Publishing, New York). "Name the person you want, the one you most trust to make the right decisions, and then the couple can work out their respective roles between them."

I’m not sure my current husband will honor my wish to be buried next to my first husband. Should I include it in my will?

It couldn’t hurt to include your burial preferences in your will, but it’s certainly not required. Out of respect for the deceased and survivors alike, most wills aren’t even opened until the funeral is held or, at least, burial arrangements have already been made. You didn’t say whether you have discussed your burial wishes with your current husband, but he certainly has a right to know about them. If he doesn’t want you to be buried next to your first husband but you are adamant about it, make sure that your children or other heirs are aware of your request. Tell your priest, minister or rabbi about your wishes, too.