What, you might ask, is a piece on estate planning doing on an investment related web site?
As most of my regular readers well know, while money management is a significant focus of ours, wealth management is the ultimate goal of all that we do at our firm. So, when it comes to matters of finance, we tend to focus on the bigger picture.
This, the first of a short series on basic estate planning articles, will touch on what a simple will is and why you might need one.
A simple will is a document that designates how you wish your property to be distributed among your relatives, friends, and favorite charity. Your will is also the place where you will identify people for important roles, such as:
- The guardians for your minor children: who will care for and raise them.
- The executor for your estate: who will be responsible for ensuring that all of your wishes as articulated in the will are carried out.
- The trustees: who will manage any property you wish to be held in a trust vehicle, usually for future use by beneficiaries.
Only a written will can guarantee that your instructions will be known and followed after your death. If you do not write a will, state law will determine what happens to your wealth.
In most states, if you have children but no spouse, the state will appoint a guardian who will be responsible for attending to their finances while they are minors. If you have no spouse or children, if living, your parents will receive the inheritance. If you have no surviving relatives, the state receives all of your assets!
This may be a lot to consider, but to ensure the safety and protection of your loved ones, make your wishes explicit in a written will. Going without could be extremely hard on your survivors.
Trust that your most difficult decisions will involve whom you would like to ask to be the guardian of your children and the executor of your will.
Will I Ever Need to Change My Will?
It turns out that your will can be nullified by most major life changes. In general, a will can be rendered invalid by any of the following events:
- Getting married
- Having a child
- Getting divorced
- Moving across state lines
When you are married, many states assume that in the event of your death, you intend for your property to go to your spouse and children, if you have any. If you wrote your will before you got married and didn't include your spouse, your will could be made invalid. The same is true if you bear a child. If you don't change your will to acknowledge the child, it could be invalidated.
Codicils are amendments to wills and can be attached directly to the existing will. So if you are getting divorced, remarried, are pregnant or moving to a new state where the laws might be different, you should rewrite or amend your will.
What Does Probate Mean?
After someone passes away, all of his or her possessions become part of the estate. The transferring of the estate's assets to the beneficiaries is called probate and is supervised by the probate court. During this process, the court validates the will and insures that the assets are distributed in accordance with the will.
Often, probate of a will can take a long time. If there are challenges to the will, the process can tie matters up in court for months or possibly several years. As a result, probate can be somewhat costly because of court fees. What's more, if you have property in several states, papers must be filed in each state's probate court. Then when the administration of the estate is complete, the will becomes a public document.
To avoid this time-consuming hassle, transferring assets to a trust can bypass probate.