A written will is the cornerstone of most estate plans. A written will, prepared by an experienced attorney, allows you to:
- Select the person responsible for carrying out the wishes you set forth in the will. This individual is known as the executor or personal representative
- Direct the payment of debts and taxes
- Make specific bequests or gifts of tangible property like family heirlooms or sentimental items. It is useful to include the language, "If owned by me at the time of my death" in case the item has been sold or lost, in your estate planning document
- Control the distribution of the remainder (residue) of your other property
- Name a guardian or guardians for your minor children and their property
- Specify your preferred burial arrangements
A court will consider a document to be a valid will if, looking only at the document itself, it finds that it was intended to be the final expression of the person's wishes. Additionally, the person creating the will must be of "sound mind." While each state varies in its specific requirements, sound mind is usually established in court by showing that the person making the will:
- Was legally old enough to understand what they were doing, usually 18 years old
- Knew what assets they owned
- Directed the disposition of those assets to people or institutions generally expected to receive them
- Understood that, by signing it, the will made a final disposition of property. This requirement generally only requires that the person understand the will and its contents at the time of signing. Thus, a person who is failing mentally but still has "good" days can make a will during lucid periods as long as the person understands what they are signing.
Usually, a letter stating one's desires or a list of property is not a valid will. There are many types of wills, including holographic wills, video wills, and self-proving wills, and each has it own requirements in order to make it valid. While each state law varies, a will must generally have witnesses in order to be valid.
What if there is no will?
When a person dies without a will, he or she dies intestate. If you die intestate the laws in the state where you live control distribution of your assets. The state may appoint a lawyer to oversee the distribution of your estate and that lawyer will be paid out your estate's assets. The state may even claim your property if you have no apparent heirs. If you do have heirs, they may be forced to pay sizable taxes in order to keep the property you have left behind. The state will also appoint a guardian for your children without any input from you.
Usually, estate matters are handled in state probate court. When you die intestate, the first thing the state will do is appoint an administrator. This administrator is often required to pay certain fees and post a bond. These costs are charged back to your estate. If your family cannot decide who should be appointed as the administrator, the court may appoint an attorney who will charge your estate for their time. Once the administrator is appointed, they will look to the state laws for guidance on the distribution of your assets. Because you have not expressed your wishes, the state will substitute its own judgment about distribution of assets to the following people:
- Your spouse: Most states provide that a certain sum be set-aside for the surviving spouse and/or children. This amount is usually taken "off the top" before any claims by creditors, beneficiaries and other heirs are paid, but it is generally a modest amount. Many states also give the surviving spouse an interest in any real estate owned by the decedent.
- Your children: If you have children, many states will award them the remaining portion of the estate. If you were a single parent, your children will inherit your entire estate. Your children could end up with a large sum of money even if they are infants. A court appointed guardian usually supervises this money until your children reach the age of eighteen. Thus, at age eighteen your child might suddenly have a large sum of money at their disposal to spend however they like.
- Your parents and siblings: If you are unmarried and have no children, your estate will go to your parent(s) or, if they have both died, to your brothers and sisters. Similarly, if you are married but have no children, the portion of your estate remaining after your spouse receives his/her share will go to your parents, or if they have both died, to your brothers and sisters.
Many people mistakenly believe that having a will requires their heirs to go through the expense of probate and therefore do not make a will hoping to avoid probate and estate taxes. Some individuals also believe they can avoid probate and estate taxes by using will substitutes. Common will substitutes include the following:
- Gift of assets, property or cash
- IRA or other pension plans with a designated beneficiary
- Life insurance
- Joint checking/savings
- Jointly owned house
- Property assignments
Using a will substitutes may allow you to reduce the size of your probate estate. However, these substitutes will not reduce the size of your taxable estate. For example, if you own your house jointly with right of survivor to your cousin, your cousin will take control of the house upon your death, but will not necessarily avoid probate and all estate taxes on your house.
In fact, assets controlled by other will substitutes may be frozen by the state to ensure payment of state, death, or other taxes. Moreover, property or bank accounts owned jointly with the right of survivorship are wholly owned by the survivor upon your death. Once you die, the survivor has the absolute right to do what he/she wants with the property. Regardless of any "understanding" you had prior to your death, your cousin does not have to sell your jointly owned house and give your portion of the proceeds to your Aunt as you requested.
There are no real substitutes for a will drafted as the cornerstone of an estate plan. A will created by an experienced wills and trusts attorney will help you make sure that you, and not the state, controls the distribution of your assets and the care and maintenance of those you love upon your death.