Will

Writing a will or a testament is the first and most basic step of personal financial planning. This can be done by anyone who is of sound mind, and you don’t need the help of an attorney to do it. When you are making out your will, you generally at least designate who will handle your estate when you pass away, and who will get your property and belongings. A will can also create a trust upon your death that will become the owner of your property. Then the trust document spells out who eventually gets the property or what happens to it. To learn more about trusts, click here.

Depending on the state that you live in, there may be additional requirements for writing a will, but in general a will must contain the following:

1. The testator, or the person making the will identifies himself or herself as the individual making the will. This is often done by the title of the document being “last will and testament”.

2. The testator states that he or she revokes all previous wills. This is generally implied that the most recent will is the most correct one, if there were previous wills made.

3. An heir, or multiple heirs must be identified.

4. The testator must state that he or she is of a sound mind to dispose of his or her property and that they are writing a will willingly (that sounds funny).

5. After writing a will, the testator must sign the document in the presence of two disinterested parties, or people who in no way benefit from the will. Many times people will sign in front of a notary, but this is not required.

6. The testators signature must be at the end of the document. Any writing after the signature will be ignored or could possibly invalidate the entire will.

As previously mentioned, the will should identify a person who will handle your estate when you are gone. This person is called the EXECUTOR. After a person dies, a probate process has to occur. This happens in the local county court where the person lived. The probate process is a public process where the court makes sure that the will, or wills of the deceased person are valid, and that an executor is appointed. So if you don’t name your own executor, the court will pick one for you!

Anything that you own that was in your name, and is being passed by way of the will, is now public information as a part of this probate process. During probate, anyone can bring a claim against your estate. For example, your next door neighbor could come to the probate court and say that you owed him $10,000. Of course he would have to prove to the probate court that this was true. This legal process of probate ensures that all claims are resolved and that the person’s will is executed fairly.

It is very important to note that when writing a will, your retirement accounts may not need to be mentioned in the will. Retirement accounts such as IRA’s, 401k’s, 403b’s, etc. usually have named beneficiaries. Deferred annuities also have named beneficiaries. These types of assets that have beneficiary designations will not be a part of the probate process and will not pass under direction of the will. Beneficiary designations override a will, and those types of account will pass directly on to the beneficiaries listed without having to go through probate. So it’s very important to review your beneficiary designations to make sure that you have the right people listed.

Even though you are writing a will, you still need to review the beneficiary designations on all your accounts, including your life insurance policies. Life insurance policies also have beneficiaries named on them. These assets will also pass on directly to the beneficiaries no matter what the will says. I know of at least one person who assumed that her husbands will took care of making sure that all of his assets, including his life insurance policies would pass on to her if he died. She didn’t realize that one of his life insurance policies that he purchased during a previous marriage still had his ex-wife listed as the beneficiary. Who do you think got the money from that life insurance policy? That’s right, the ex-wife.

When writing a will, you may not need to include assets held in a brokerage or mutual fund account. Many brokerage firms, mutual fund companies and banks now offer a registration type that you can add onto a non-retirement account called “transfer on death”. This essentially names a beneficiary for the assets held in that account, the same way an IRA has beneficiaries. This type of “transfer on death” registration also overrides what’s in a will. These assets will also not be included in probate.

When writing a will, it is also important to name a guardian for your children if you have minor children. If you do not do this, once again the court will decide who that guardian will be. The last thing you may want is a court-appointed, non-family member guardians for your kids. This may mean that the children are split up into foster homes. You also may not want your family to end up fighting over who will take care of your children. And again, there may be certain family members who you definitely would not want to be guardians for your children. So please, if you have kids, name your own guardian in your will.