No matter how young or how old they are, everyone should have a will. Yet only 40 percent of Americans have one. Many people haven’t taken the time to draft a will because they are unclear on how a will works and what happens if they pass away without one.
The future is unknowable, so being prepared for the unexpected is always a good idea, and that includes making a will.
Creating a will allows you to provide for your family by bequeathing your home, your retirement savings, and other assets. It also allows you to make your final wishes known concerning your funeral and special bequests to charities or other groups. Without a will, you have no control over how your assets are liquidated when you are gone.
Making a will simplifies things for relatives who will have to deal with the probate court. Probate is the process of reviewing and executing a will, and if you take the time to craft a will, it can save your relatives on estate taxes, make it easier for them to receive assets, and eliminate a lot of family squabbling. A will also allows you to name a guardian to care for your children and your pets.
Unfortunately, there are still many misconceptions about wills, how they work, and the role of probate court. This article will correct five common misconceptions about making your will.
There are various documents you should consider as part of estate planning. However, everyone’s situation is different, so you need to consider other types of documents as part of your estate plan.
A living trust, for example, is similar to a will. You create a living trust during your lifetime to outline your desires regarding what to do with your assets, your dependents, and what you want to leave to your heirs. The big difference is that this is a “living” trust, which means it is in effect only while you are alive. A will only goes into effect when you die. Having a living trust enables your designated successor (similar to an executor for a will) to carry out your instructions if you become ill or incapacitated. Having a living trust also helps you make inheritance decisions that won’t be held up in probate court.
Sometimes called a medical directive or healthcare power of attorney, a living will, like a living trust, is only in effect during your lifetime, but it is specific to medical care. For example, you may want to have a do-not-resuscitate order in place in case you become deathly ill. Your living will can outline your wishes regarding pain relief, antibiotics, blood products, feeding, the use of a ventilator, and other procedures.
As part of your will, you will want to appoint an executor to take charge of your affairs. The executor may need to petition for letters of testamentary from the probate court to pay debts, transfer funds, and manage the estate.
The types of documents you need will depend on your situation and how you want your estate handled when you die.
This is a very common misconception, but it is just not true. If you die intestate—meaning you die without making a will—then it is up to the state to step in. However, that doesn’t mean the state takes possession of your belongings. Each state has its own inheritance laws, but generally, your spouse and children will inherit whatever you leave behind as part of your estate. The only time the state claims your assets is if no relatives can be found.
Even though every state has different probate laws, it never takes years to resolve an estate. Most probate courts only delay long enough to give creditors time to file a claim. The length of time allowed to file a claim starts when the probate notice is published and usually lasts 3-4 months, depending on the state, but no longer than a year.
Some people may fear that the cost of probate, lawyer fees, and court fees will eat up any inheritance. In truth, many states don't even require probate. Check your local inheritance laws to see if you live in a state with especially high legal fees. Also, seek out a lawyer who charges a reasonable flat rate rather than an hourly fee. No matter where you live, the executor should know that legal services are not required for probate.
In medieval times, it was true that the estate would pass to the oldest male heir. However, that is certainly no longer true. Being the oldest carries no weight when it comes to inheritance or serving as executor of a parent’s estate.
Your will outlines who is in line to inherit. If you don’t name your heirs, then your spouse is first in line to inherit, followed by children and then grandchildren. After that, the order of inheritance succession falls to the deceased's parents, then brothers and sisters, nieces, nephews, grandparents, aunts, uncles, and cousins. Inheritance law does differ from state to state, so do your research.
There is a persistent myth that an oral will—a spoken declaration someone makes before dying—is legally binding. Only 20 states still allow oral wills, and there are extensive limitations. In Washington, for example, you can use an oral will to dispose of up to $1,000 in property, although if you are in the armed forces or working on a merchant marine vessel, you can make an oral will without restrictions. Other oral will stipulations include that you must have two witnesses, you have to be near death, and you have to have someone document the oral declaration and file it with the court within six months.
Even if you live in a state that allows oral wills, it is no substitute for a written will that clearly outlines your wishes regarding how to distribute your estate.
A will is an essential part of an estate plan. In fact, for most people, estate planning starts with drafting a will. Your financial advisor can help you understand how your will fits into your estate plan. They also can help you determine what additional things you might need (e.g., life insurance), review how to address estate taxes, and develop strategies to take care of your family after death. iQ Credit Union has financial experts standing by to advise you on investment and retirement strategies.