Virtually everyone postpones writing a Will. Maybe it's because we don't want such a tangible reminder of our mortality. Or perhaps we view the process as relinquishing the ownership of our property. Whatever the excuse may be for putting off the drafting of a Will, many people do not realize that writing one actually prevents what is feared. In fact, a Will may be the most important document that you ever write, because it allows you to select the persons who will receive what you own when you die. If you don't have one in place, you cannot select the recipients of your property and the state you reside in will determine how your property is divided.
What is a Will?
In simple terms, a Will is a legal document that dictates how you want your assets to be distributed after you die. It's a fluid document because it has no effect until you die - you can change it whenever you want. To be valid, however, the document must comply with several requirements under state law - the number of witnesses, whether it must be typed or handwritten, and others - all of which are fairly standard state to state and very easy to satisfy.
A Will includes specific directions on how you wish your estate to be distributed after your death, including provisions for any tangible personal property that you may own - jewelry, furniture, and the like, as well as naming guardians for any minor children. It also indicates what sources will be used to pay any estate taxes and debts that are due, and it names an Executor who will be responsible for the settlement of your estate. It ends with your signature, the signatures of required number of witnesses, and typically a notary public's oath about the validity of the various signatures.
Why Do I Need One?
Virtually every person - married, divorced, single, childless, parent, in good health, in bad health - should have a Will for the simple reason that without one, you cannot determine who should receive your property. Each state has a default plan for how property must be distributed if you die without a Will, with the default (and mandatory) scheme depending on your marital status, whether you have children, if you have any living parents or siblings, and other criteria. Furthermore, even if you die with no living relatives, the state will not permit distributions to a friend, a favorite charity, or any non-related person. Instead, the property will most likely end up going to the state.
What is Probate?
If you die with a Will in place, the Executor named in the Will typically presents the will to the local clerk of court and asks the court to authorize the Executor's administration of the estate. This process of presenting the Will and administering the estate is called the "probate" process. The probate process generally is fairly informal - the Executor presents the Will, is authorized to administer the estate, determines the beneficiaries and creditors entitled to the money or other property, makes the distributions, files any tax or probate documents with the various government entities, and closes the estate, all within the proscribed and monitored timeframe. If the Executor sees potential problems with the Will or foresees a will contest, he or she may request a more formal process, but this rarely is needed.
If you die without a Will - known as intestate - the local court must monitor the estate's administration even more closely. This is because the court - not a Will - provides all of the authority to act. The administration and closing of the estate generally requires more court involvement, often more publicity, and definitely more red tape.
Individual or Corporate Executor?
Choosing an Executor is an important decision, particularly if you have significant property or investments. Depending on the amount of property and the types of property owned, administering the estate can require considerable time and expertise. A relative or friend may not be "honored" to be named Executor if it causes loss of sleep from worry or he or she is incapable of conducting the job effectively. Although many individual Executors waive receiving any Executor's fees, they often use the funds otherwise paid to a corporate Executor to hire advisors to assist in administering all but a very simple estate.
If your Will provides for distributions to a trust held by a bank or other corporate trustee, that institution often is the best equipped to administer the estate in the most efficient manner. Similarly, corporate trustees may be useful even absent a trust, since they have significant experience in estate administration and have the ongoing technical knowledge and legal expertise to handle virtually every situation.
A Will's importance is clear regardless of your personal situation. Without a Will, you have no input about the distribution of your property after your death or the persons involved in administering the estate. A local court makes those decisions, and it has no authority to deviate from the state law. In essence, the state steps into your shoes and makes all of the decisions for you.
This can be easily avoided with proper planning. By creating your Will now, you can always add to the provisions or alter the document as your life evolves. It's important to review your current Will every five years to ensure that it's up to date and still reflective of your future wishes.
Updated: January 1, 2013
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.