Published February 27, 2014
Planning for the event of your death isn’t a fun topic. But dying without a will means giving up control of how your assets are distributed and who will take care of your children.
“Think of a will as your last love letter,” says Rip Mason, CEO of LegalShield. “No one likes to talk about it, but it’s the responsible thing to do, no matter your income level.”
He says at least half of Americans don’t have a will, which means the state will decide who gets what and who is in charge of the estate and children, if applicable. “That means assets could go to places you had no intention of them going at ratios you wouldn’t be approving.”
In most states, dying without a will means half the assets go to your spouse and the other half to the children, explains Mary O’Reilly, a trust and real estate attorney and partner at Meltzer, Lippe, Goldstein & Breitstone. “It gets more confusing if there isn’t a spouse or children; then the process can really get bogged down and messy.”
There are websites that allow you to create your own will, and experts say those can work for more simple estates, but O’Reilly details that some states get pretty nitpicky when it comes to determining the legitimacy of a will.
“In New York, for example, a will is not valid until you make a declaration of ‘this is my will’ with a witness present, and that witness then has to show up in court and testify that he or she saw and heard you say that.”
Mason says the cost of creating a will with an attorney varies by state and complexity. “A simple will runs about $300 to $1,000 and the more complex wills that tend to also require an estate planner can be $5,000 and up to $10,000 or more.”
With this in mind, here are expert tips on how to get started on the process:
Define Your Assets. The first step to creating a will is listing all the assets you want to pass on, which includes bank accounts, properties, stock investments, valuable household possessions, jewelry and anything else that is important to you.
“Reviewing those assets and determining which will go where and what should be used to pay off any debts will make the process much smoother for your loved ones," says Mason.
O’Reilly adds that assets that are held jointly, like retirement savings accounts and life insurance, are not covered in a will because they have beneficiary designations. “You have already named who should get these funds when you die -- the key is to make sure you keep it updated so the money goes to the right person.” Assets that are jointly held, like a savings account or home, will automatically be left to the other person.
Gather Necessary Documents. To make the will as accurate as possible you will need to collect documents that prove your assets. When meeting with a lawyer to create the will, Mason recommends bringing copies of insurance policies, 401(k) and other retirement savings plans, bank accounts, list of assets, real estate deeds and appraisals of any items included in the will.
Pick an Executor. The executor will be the person who is in charge of distributing assets in accordance with the will and arrange for any payments of debts or other expenses. O’Reilly suggests picking someone with similar financial goals and good communication and organizational skills.
“This person should be financially responsible and have some professional savvy. There are many deadlines and a lot of paperwork involved in this role, and they need to be strong. There can be a lot of contention among family members after a death, and they need to be able to handle that.”
If an executor isn’t named, the court will appoint one, which isn’t always the best alternative. “There could be competing views among family members over who should be in charge," says O’Reilly.
Name a Guardian. Parents of young children will want to detail who should get the kids in the event they both die. “Pick someone who understands and will continue your parenting style,” suggests Mason.
In O’Reilly’s experience, having to choose a guardian is the biggest stumbling block for people when creating a will. “I tell them that the chances of both of them dying is small, but if you fail to do it, the court will appoint someone and could choose someone that neither one of you likes.”
Choose a Trustee: A trustee is the person who is in charge of managing the assets passed left to children.
“If you have very young children, you want to make sure the assets don’t get passed onto them automatically,” suggests O’Reilly. “I think giving them full access to the assets at 30 is more appropriate than at 18.”
Take Taxes into Account. For wealthy individuals, tax planning should be done in wills to avoid getting hit with the estate tax. “You can minimize your tax exposure and set up different trusts to avoid getting hit with the hefty estate tax,” says O’Reilly.
When leaving assets to someone with special needs or on government-assistance programs, she recommends against leaving the assets outright to the person. “Build a special needs trust so the government doesn’t take the inheritance into account when determining the person’s income and take them off assistance.”
Review Often. It’s a good idea to revisit your will annually to make sure the designations and appointed people are still accurate. “After every major life event, particularly a marriage, divorce or death, you need to make sure your will still accurately reflects your desires,” says Mason.