Though nearly everyone should have a will, it is not always the most important estate planning document.
Many of a typical family’s assets, such as retirement accounts, can be transferred outside of a will by naming beneficiaries, and documents like financial and medical powers of attorney may have stronger authority in determining the outcome of an estate.
Although it may not seem like it, having an outdated or ill-written will can be very costly and interfere with otherwise well-laid plans for your estate. Wills are also crucial for individuals who have dependent children; if both parents die, the will serves as the best way to name guardians for those children.
Our experts suggest that you get your estate planning documents ready as soon as big life changes happen, like getting married or buying a home. You should also revisit your will occasionally, especially as you approach retirement age. Here are 11 simple steps to help you get started:
- Choose between hiring an estate planning attorney or using a do-it-yourself software program.
- Choose the beneficiaries for your will.
- Choose the person who will execute your will.
- Choose a guardian for your children.
- Get specific about who gets what.
- It’s important to be objective when deciding who gets what.
- Include a letter with the will.
- Make sure you sign the will.
- Decide where you would like to keep your will.
- Proofread and Amend your will.
- In addition to a will, consider adding the following documents to your estate plan.
1. Choose between hiring an estate planning attorney or using a do-it-yourself software program.
If your financial situation is not complex, you may be able to use an online software program from a reputable source to draft your will. Some programs to look into are:
- Quicken WillMaker & Trust
But there are times when hiring an estate planning lawyer is necessary. “There are so many regulations that must be obeyed,” says Patrick M. Simasko, an elder law attorney in Mount Clemens, Michigan. They can’t make it to the lawyer or go online and create their documents, which is fantastic, but they don’t know how to properly fill them out or sign them correctly, so they’re meaningless.
For a few thousand dollars, you may hire an attorney to draft basic estate planning papers. A $100 or less online software program, on the other hand, may be sufficient. Experts caution that sloppy paperwork can be very costly in the long run.
2. Choose the beneficiaries
Failing to name or update beneficiaries on important accounts that are linked to the plans outlined in their wills is a typical blunder made by people when arranging their estate. “What’s recorded on all of the bank accounts, life insurance, and property determines where everything goes,” Simasko adds. “The beneficiary listed above the will does not take precedence over it; however, there is often no consistency.”
3. Choose the person who will execute your will.
The executor of your will is in charge of carrying out the instructions outlined in it. This individual is frequently a family member or an outside person who must be responsible and thorough. “If you don’t have any children, you may always name your attorney or CPA,” says Brian J. Decker, owner and founder of Decker Retirement Planning, which has locations on the West Coast. A corporate trustee is a bad idea because of the expense. They charge 1% of the estate annually, even if they do nothing, and you have to give them all your assets, so it’s a terrible deal.
4. Choose a guardian for your children.
Individuals with dependents must name a guardian in their wills. You’re not required to ask permission from the person you want to name as guardian, but it is common practice to list multiple guardians in case one of them can’t take on the responsibility.
5. Get specific about who gets what.
Deciding which assets to include in your will and who gets what may be one of the most time-consuming aspects of creating a will. According to Stanley Kon, co-founder and chairman of Ripsaw Wealth Tools in Colorado, individuals should take the types of assets being allocated into account when making decisions about their inheritance. This will help with both decision-making and asset management down the line.
“Grandchildren will have a longer-term investing horizon than their parents,” Kon stated in an email. “An educational fund, on the other hand, is likely to have a shorter investment horizon with less risk tolerance.” Using this technique, you may separate the amount you need to finance your anticipated lifetime from what you anticipate to give people and manage it accordingly.
6. It’s important to be objective when deciding who gets what.
According to Decker, children often stop talking after a parent’s death due to boilerplate language directing the distribution of tangible assets, like artwork or jewelry, which are supposed to be divided equally among siblings. This highlights the importance of thinking practically about asset division.
“If you have three children who all play the piano and adhere to this boilerplate language, the first one will choose the Steinway,” he explains. “You can’t divide tangible assets equally. Because of this, you’ll have children with a bad relationship after the estate is divided because they didn’t get an equal amount.”
7. Include a letter with the will.
Individuals may include an explanatory letter to their will. This letter, which may be personalized, can be used as a personal Goodbye message and to go into further detail about specific desires.
8. Make sure you sign the will.
A will that is incorrectly implemented may be declared invalid. Witnesses must sign your will in many jurisdictions, and the witnesses can’t be people who would get anything in the will. Your witnesses should also be at least 18 years old.
If possible, choose witnesses who live close by and are likely to be around when you’re not. For example, if your will is brought to court and contested, the judge may want a witness present to vouch for its validity. The number of witnesses required may also differ depending on the state in which you reside.
9. Decide where you would like to keep your will.
Keep your will and other essential documents in a fireproof safe, and make sure someone you trust knows where it is as well as the passwords to your financial accounts.
Some people may choose to have their will stored and even performed electronically. Electronic wills, often known as e-wills, are only legal if they satisfy specific criteria such as being in text format rather than audio or video and complying with state laws on whether witnesses are present in person or via video link.
10. Proofread and Amend your will.
Wills should be updated every five years, according to Daniel R. Bernard of Twomey, Latham, Shea, Kelley, Dubin & Quartararo LLP in New York.
According to Bernard, “just as you get your car’s oil changed every three thousand miles, this [checking and updating your documents] doesn’t always happen. He recommended that people review their documents whenever they experience a major life event, like the birth of a new family member, divorce, or the death of a spouse or parent.”
11. In addition to a will, consider adding the following documents to your estate plan.
A will is not the only document you need for estate planning.
You might also need trusts, which let you decide when and how to transfer your assets. There are lots of different types of trusts, but one common kind is testamentary trust. This type of trust can be set up in your will to give away assets after you die.
After you finish writing your will, other estate planning documents, like a living will that communicates a person’s desires for medical treatment or a power of attorney that allows someone else to make financial and legal decisions on their behalf, should be your next step.