A will is often the cornerstone of an estate plan, and in most cases, yes, you should have one. A will can enable you to leave your property to anyone you choose – be it your partner or spouse, a child, other relatives, friends, a trust, or a charity – as well as make clear your intentions for healthcare and financial matters if you are incapacitated.
Guardian for Minor Children
In many states, a will is your only way to make clear who you want to be legal guardian for your minor children if you die. If you wish, you can name different people for different parts of the job: a personal guardian, who takes physical custody of the children, and a property guardian, who manages the children’s assets. This can be the same person or not. Probate court would have final approval, but courts usually approve your choice of guardian unless there are compelling reasons not to.
A will allows you to designate a person as your executor to act as your legal representative after your death. An executor carries out many estate settlement tasks, including locating your will, collecting your assets, paying legitimate creditor claims, paying any taxes owed by your estate, and distributing remaining assets to your beneficiaries. As with naming a guardian, the probate court has final approval but will usually approve whomever you nominate.
How to Transfer Property
Transfers through a will are either:
- “Specific bequests” of things like heirlooms, jewelry, furniture, or cash;
- “General bequests” such as a percentage of property; or a
- “Residuary bequest” – that’s what is left after your other transfers.
Generally, a will is a written document that must be executed with appropriate formalities. These includes signing the document in front of at least two witnesses. You must be mentally sound. Though it is not a legal requirement, a will should generally be drafted by an attorney who is very familiar with estate law in your state. If you have no property or assets and no children, you likely do not have need for a will.
Outside a Will
There are some limits, however, on how you can distribute property using a will. For instance, your spouse may have certain rights with respect to your property, regardless of the provisions of your will.
Some property cannot be transferred by a will. For example, property you hold in joint tenancy or tenancy by the entirety will automatically pass to the surviving joint owner at your death. Also, the assets for which you have already named a beneficiary will pass to that beneficiary regardless of what is in your will. That includes life insurance, pension plans, IRAs, and TODs (transfer on death account beneficiaries). It is good practice to name contingent beneficiaries, in your will as well as on your accounts, just in case your primary beneficiaries are not able to receive your assets.
Pay Estate Taxes and Expenses
State law determines how estate taxes and other expenses are divided among your heirs unless you direct otherwise in your will. To ensure that the specific bequests you make to your beneficiaries are not reduced by taxes and other expenses, you can provide in your will that these costs be paid from your residuary estate. Or, you can specify which assets should be used or sold to pay these costs.
Fund a Trust
In your will, you can create a trust, known as a “testamentary trust,” that comes into being when your will is probated. Your will sets out the terms of the trust, such as who the trustee is, who the beneficiaries are, how the trust is funded, how the distributions should be made, and when the trust terminates. This can be especially important if you have minor children or a spouse who is unable to manage assets or property.
A “living trust” is a trust that you create during your lifetime. If you have a living trust, your will can direct the transfer any assets that were not transferred to the trust while you were alive. This is known as a “pour-over will” because the will pours over the rest of your estate to your living trust.
Do You Need a Will?
If you do not have any property and no children, you likely do not need a proper will. But you might still want to provide written instructions about who you want to make healthcare decisions for you, and who you would want to pay your bills if you are not able to. These documents are cornerstones of estate planning, even if you do not have assets to pass to heirs.