Setting up a well-drafted last will and testament should be part of everyone’s estate planning process. Though thinking about and planning for your own death isn’t pleasant, wills and trusts provide an extra layer of security for the future of your loved ones, especially in these uncertain times.
What Does a Will Do?
A recent survey found that only 38% of Americans currently have a will. Out of that percentage, 26% set up their wills specifically because they were afraid of falling seriously ill or dying from complications related to COVID-19.
You might be wondering, “Do I need a will?” The answer is “yes.” Creating a will allows you to control what happens to your property and assets after your death, appoint a legal guardian for underage children, and choose an executor to oversee the distribution of your assets. Your will needs to incorporate several elements, not all of which are immediately apparent. Here are five essential components you need to include in a will or trust.
First, and most obviously, you need to list all of your assets. Be as specific as possible when describing each asset to avoid confusion and possible conflicts. Make sure to include provisions for your digital assets. This includes making arrangements for passwords, two-factor authentication, and other access methods.
You also need to be aware that there are some elements of your estate that are not governed by your will. These include life insurance benefits, annuities, as well as money in retirement accounts and pension plans. The same is true for properties that are held in a trust or owned jointly with your spouse. You will have to make separate provisions for these assets.
Next, you need to list who will receive each of your assets. Being straightforward and specific ensures that all your loved ones get what you want them to have after your passing.
If you don’t have a will, most states will distribute your assets among your next of kin. Listing specific beneficiaries gives you the opportunity to include people who aren’t members of your family, and it allows you to exclude relatives you don’t want to inherit assets.
Next, you need to choose and name someone to be the personal representative (or executor) of your will. This person will be responsible for making sure that all the provisions in your will are carried out.
They will take an inventory of your assets, have them appraised, and distribute them after your passing. In addition, they will close your accounts and settle any outstanding debts or taxes.
There are few limitations on whom you can choose. Many people name family members or friends; however, this is a very time-consuming role. The best option is often an estate planning lawyer or financial advisor. You should also consider backup choices in case your primary pick is unable or unwilling to take up the responsibility.
Include instructions on how to settle any unpaid debts or mortgages. Specify which of your assets should be used to pay any debts you owe to avoid back taxes or other complications further down the line. Some debts may be forgiven after your death, so it will fall on the executor to handle these negotiations.
5. Legal Guardianship
Finally, if you have any children or other legal dependents, include provisions for their legal guardianship. Otherwise, a court will be called upon to settle the issue. If your choice of guardian might be contentious, you can also include a letter of explanation. Establishing a clear estate plan has many obvious benefits. If you’re considering creating a will or trust for your assets, you should reach out to an estate planning attorney or another professional who’s familiar with this process to ensure that your wishes are carried out.