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Financial Learning Center


Important Legal Documents

Let the World Know Your Desires: Prepare a Will

The first tool you will need in your estate plan is a will. A will (the actual name is a "last will and testament") is a formal legal document stating how you want your estate distributed. After you die, it is submitted to the court and probated.

SUGGESTION: You and your spouse should have separate wills. The way you distribute your assets if you survive your spouse will be different than if you are the first to die. You may also want different executors.

IMPORTANT NOTE: Although there are many do-it-yourself kits for will preparation, it is very important that an attorney help you prepare this critical document. Each state has different rules, and what you might think is a very simple situation may in fact require special planning. A simple will should not cost a lot of money, yet a mistake can render the document worthless just when you need it most.

What is in a Basic Will?

  • Your name, city, and state where you are domiciled (i.e., place where you currently live and intend to reside). The person who is signing the will and whose estate is being discussed in the will is called the "testator" (some attorneys may call a woman preparing a will a "testatrix;" we will use "testator" for both genders).
  • Appointment of the executor (and alternates) of the estate. In many cases the testator will state that the executor does not have to post a bond (insurance).
  • Appointment of the guardian for minor children.
  • Statement of specific transfers. When you decide to give assets to heirs at the time of your death, the transfer is called a "bequest" (or a "devise").
  • Statement of who gets the balance of the estate.
  • Instructions for the executor to follow and powers granted.
  • Description of controls you want over bequests (or devises) to minors or other parties.
  • A place for the testator to sign and date the will.
  • A declaration that the witnesses sign stating that they witnessed the signing and that the testator was of sound mind. A notary public usually signs this section, too.
  • Provisions to allow or state the GST exemption allocation, since there is no ability to allocate a decedent's unused exemption to a surviving spouse.

Community Property's Special Rules

Community Property is property that is acquired while living in certain states while married. Each spouse owns an undivided one-half interest in the property, regardless of how the property is titled. Property acquired before marriage, through gift or inheritance or under a nuptial agreement, is generally not community property. At the time of your death, half of any community property will go automatically to your spouse without being part of your probate estate. Of course, you can leave the other half to your spouse in your will.

The following states have community property laws:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

IMPORTANT NOTE: If you move from a common law state to a community property state, see an estate planning attorney who is familiar with the community property laws of your state.

Changing Your Will

There are certain circumstances where it will be necessary to revisit your estate plan and perhaps change your will. You can do this by adding an attachment to the will called a "codicil". Your attorney may ask you to sign a new will if you are making major changes.

IMPORTANT NOTE: You should never make a change to the will yourself. Crossing out something or by otherwise making a mark on the original document will not only prevent your change from being effective, it will probably make the entire document invalid. See your attorney to make a change.

IMPORTANT NOTE: You should never hold the original will in a safety deposit box. When you die, the box will be sealed by state law, and your executor will have a hard time proving his or her authority without the original will. In fact, you should have your bank or your attorney hold the original copy of your will, and ask for a copy for your records.

SUGGESTION: Sign only one copy of the will. It will be easier to prove the authenticity of the document if only one original exists. If you have the original will, never remove the staples or otherwise deface it. It will render the document useless. Return it to your bank or your attorney.

You should review and consider changing your will if the following events occur:

  1. You move to another state.
  2. You become separated, get divorced, or remarried.
  3. You inherit or otherwise acquire a lot of money.
  4. You have a new child through adoption or birth.
  5. A person named in the will develops financial problems or severe medical problems, becomes a Medicaid recipient, or has other issues listed in the section Important Steps.
  6. A person you named in your will to receive a bequest dies or is very ill and near death.
  7. The tax or estate laws change.
  8. Your will was prepared before 1981.
  9. You change your mind about who should be included in your will, or how specific assets should be handled.
  10. To ensure proper GST exemption allocations are included.
  11. Consider the Executor's ability to elect to transfer your unused estate exemption (but not GST) to a surviving spouse, based on your asset transfer objectives. In the event of your death and your spouse's remarriage, utilization of your unused estate tax exemption may not be available to your former spouse.

Remember, these are your decisions and you can change your point of view.

What a Will Cannot Do for You

A will is an extremely important document and the cornerstone of your estate plan. However, it cannot do everything. Understanding its limitations will help you prevent having any important issues from being overlooked.

Some People Can Override the Will

Your spouse will be allowed to override the will (using a power called the "right of election") to get a certain amount of your estate when you die. Even if you specifically leave him or her nothing, this power prevails. The way around this is to have him or her sign an agreement waiving this right. This is typically included in a document called a "pre-nuptial agreement" (or an "antenuptial agreement") if signed before marriage, or a "post-nuptial agreement" if signed after marriage.

SUGGESTION: If you are currently separated from your spouse waiting for a divorce to become final, ask to have him or her sign a post-nuptial agreement (you might want to sign one too just to be fair). Until your divorce is final, he or she still has the ability to exercise the right of election without this extra step. If you are in the process of divorcing, your attorney might try to win this agreement for you as part of the bargaining process.

IMPORTANT NOTE: If for any reason, you do not want to leave a child any inheritance, specifically mention it in your will (or leave him or her a very small amount, say $10). If you fail to mention him or her by name, it is possible that he or she could claim that you forgot them and therefore, must not have been of sound mind when you signed your will.

Assets may go elsewhere, even if you specifically mention them in your will.

The will controls your probate estate. Your probate estate is your estate (everything you own less everything you owe) less assets that transfer automatically at death. The two groups of assets that are outside your probate estate include:

  • Property that has a named beneficiary: Examples include 401(k) plans, other retirement plans, insurance policies, and accounts with named beneficiaries.
  • Property that is titled as joint property: The other person on a joint account would automatically inherit the property when you die. If you have an account with someone that is titled "Tenants in Common" (each of you own separate interests in the same property), this rule does not apply.

SUGGESTION: Remember, review your beneficiary designations and how your property is titled. Your will cannot control this, and you may be leaving people in your will a lot less than you think.

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