Estate Planning Introduction
It is in your interest to make a legal and binding plan that will help your surviving family and friends understand how you want your assets to be distributed after you die. If you don't make such a plan, the state will step in and handle your asset disposition for you. There is a special branch of the court system, known as Probate Court, that handles property for this purpose. It takes a long time for property that falls into the hands of the probate court system to work its way through that system. If your property falls into probate upon your death, your heirs will have to wait a long time and pay a lot of money to get access to that property. If you create a legal plan for the disposition of your estate (known as a Will) prior to your death, you get to control the disposition of your property yourself, and your heirs are spared the ordeal of probate court entirely.
Create A Will
A will is a document that allows you to assign who should get what parts of your assets after you die. Anyone who has property, children or a spouse should create a will.
Wills are legal documents that must be formally witnessed by third parties and/or notarized before they are valid. You don't have to work with an attorney to create a will, but it is a good idea. There are software packages out there that can walk you through the questions you need to consider and answer and then generate a valid will document which will be legal in your state. You can then have the will witnessed and/or notarized yourself. It is really a better idea to let an experienced attorney prepare your will for you rather than a computer program. Attorneys have a better understanding of local law governing transfer of assets than do computer programs. An attorney can make sure that no mistakes get made in having your will documents properly witnessed and approved. An attorney can also store your will for you so that it doesn't get lost in your papers upon your death.
If you own any property, and you don't yet have a will, you should act to create one as soon as possible. At the very least, you should create a will long before you die. Ideally, you should create a will as soon as you have any dependents who might require access to your assets should you die. A will should be created upon having a child, for example, or when your parents become aged and may require some of your estate money to sustain themselves in your absence.
It is best to create a will during a time when you are completely healthy. If you wait until you become ill or debilitated to create your will, it may possibly be successfully challenged in court by heirs who are not happy with what you have assigned them. The law requires that you have legal capacity to enter into a contract in order to create a durable will. So, if you try to create one after you have suffered an illness, for example, your heirs could argue that you did not have the mental capacity to make good choices when you created the will, and they can have it invalidated. Another reason not to wait is that death almost always comes unexpectedly, and it is never well-timed.
A legal and valid will gives you a voice in dispersing your property. However, there are limits to what parts of your property are covered by a will. A will covers who should take ownership of your real estate and bank accounts, for instance, but it does not cover items like your 401(k), any life insurance policies or annuities you may have, or any property that is held for you in a trust. Instead of naming a beneficiary for such non-covered property within your will, you will have to contact the organizations that manage the property and formally assign beneficiaries for the property through those organizations. Life insurance beneficiaries, for example, are assigned when you set up each life insurance policy.
A will cannot shield your assets from taxes, but in most cases, it can allow your estate to disperse your property before any outstanding debts you may have are paid. There are exceptions to this rule, of course. For example, if you own a home with a mortgage you can not change the title governing ownership of that house without first paying off the mortgage. Thus, your heirs cannot truly take possession of your house until that house is fully paid off, perhaps with a new mortgage taken out by your heirs.
If you do not have a will in place, probate courts will typically choose to pay off debts before distributing your assets. So, your family will be left with less of your estate, if they receive anything at all. With a will properly in place, your family will get your assets sooner than they would if your estate went through probate.
Once created, wills may need to be updated from time to time as important changes happen in your life. If you add new children to your family you should update your will. Updating your will amounts to creating a new will document. You must take the same care in updating your will as you took in creating it the first time. Working with a lawyer experienced in estate planning is strongly advised.