Everyone Must have a Will or Trust
In this uncertain world, two things are very certain — everybody has to pay taxes and everybody is going to die. Of course, nobody wants to think about their own death. In fact, many of us try to avoid the topic at all costs. Unfortunately, there are consequences for not planning. Similarly, everybody talks about a will, but many people fail to actually do it. Each person has his/her own reason why they don’t do it. Many just don’t get around to doing it. In fact, one survey found that the most common reason adult Indians living in America failed to do a will is just that — procrastination. Some people think that a will and estate planning is only for rich people.
Legal Requirements for Drafting a Will
As long as you are an adult and of sound mind, you are entitled to create a will. General requirements to ensure a will’s legality include signatures of at least two witnesses and your own signature, along with the date the document was created. Even though there are websites available where you can create your own will, the attorney cost is not that much, so utilizing an attorney’s expertise is highly recommended.
Legal Mumbo Jumbo
When you start looking into creating your own will, you will come across a few words which you may not be familiar with or you may have a misconception about.
The first word is estate. What is an estate? If you are thinking of a large land with a multi-story, multi-room mansion, you are not even close.
The simple basic estate consists of the following:
- Checking and savings accounts
- Your home and other real estate
- Your car
- Life insurance
- Your personal possessions
The second term you may come across is a trust. Depending on the complexity of your estate, your financial planning may benefit from a trust rather than a will. A will must undergo probate — the process of proving it in court — which can slow down the execution process. A trust does not.
The third term you may see frequently is the power of attorney, which is the authority to act for another person in a specified or all legal or financial matters.
The fourth term you will hear is the living will. The living will is a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advanced directive. Depending upon your situation, you may need all four legal documents.
The fifth term is a probate. Probate, mentioned earlier, is the legal process that ensures your will is valid. It also refers more generally to the court-supervised process of distributing an estate.
Keep it up to Date
As you update your computer and your mobile devices from time to time, all of these legal documents need to be updated as well. As you accumulate more assets over your lifetime, get married, and have children, revisiting your documents to make any necessary revisions is very important.
Here are the most important Reasons to have a Will:
- Peace of mind for your loved ones
Some people put off creating their will because they assume their loved ones will automatically get an inheritance. This isn’t always true. If you do not have a will, the legal process to obtain the money you thought might automatically go to them can be long and expensive for your loved ones after you pass.Recently a 45-year-young Indian IT professional in South Florida passed away after a heart attack. He did not have a will, and he did not put his wife’s name on bank accounts or any other investments as a beneficiary. Even though he had over $100,000 in his bank account, his wife could not withdraw any money. Unfortunately, she did not have enough money to pay for the funeral. A few days later when she hired an attorney, she found out that it would cost her a minimum of $5,000, and that it may take five to six months to get even one dollar from the bank.
- A will determines who is responsible for your finances.
Deciding who will handle your finances is a great reason to have a will. When you write a will, you have the opportunity to nominate an “executor.” This is the person who will be in charge of wrapping up all of your affairs.The responsibilities of an executor may include everything from closing bank accounts to liquidating assets, so you should choose someone who is capable and who you trust to carry out these activities. If you don’t choose an executor in your will, the court will pick one for you — and it may not be the person you’d want. In most cases, executors tend to be spouses, children, or parents of the deceased.
- Decide who will take care of your minor children.
Any time you think about your children’s future, you are bound to get emotional. If you have to think about what would happen to them if you were to die, you get even more emotional. That, however, should not prevent you from having a plan in place regarding who will take care of your minor children should both parents die.If you don’t nominate a guardian in your will, a court will decide from among your family members. However, you know your child best and are probably in a better position than a court to make sure your child does not end up in the wrong hands. Therefore, this is another of the most important reasons to have a will.
- Minimize the potential for family disputes.
Every family experiences conflicts and goes through ups and downs in their relationships. These conflicts can flare up if one of the family members dies without a will. When you die without a will, your loved ones will have to guess at what your final wishes were. This ambiguity can create friction, and even fights, which sometimes last a long time. A will may reduce these conflicts considerably.
- Minimize estate taxes
In the beginning of the article, I mentioned that everybody has to pay taxes regardless of his or her situation. Unfortunately, when you die, your loved ones will have to pay taxes on their inheritance. If you plan and create a will after you consult your attorney and your accountant, there is a very good chance they will suggest how to minimize the inheritance taxes your loved ones may have to pay when they receive property from your estate.
- Make a legal process easy for your loved one.
Most legal terms are confusing and misunderstood by many. Most people think that probate is always lengthy and expensive, but that is far from the truth if you have a will. A clearly drafted one will definitely reduce the delay. If a disgruntled family member “contests” the will because he or she thinks they deserve a larger share of your estate, your will can quickly settle the dispute.
- Leave a Legacy
I am sure you want to leave a positive impact on the world and leave a legacy after you die. The easiest way to do this is to support a charity or cause you love most. When you create a will, you can preserve your legacy by leaving a part of your estate to a non-profit organization. This donation, up to certain amounts, may also reduce your estate taxes.
Author is not an attorney, accountant, or a financial advisor. The article is for general information. To understand the pros and cons, you should consult your attorney.