Whys, Hows, Whens Of Wills

While the importance of wills is generally understood, you'd be surprised how many grownups in Amerixa don't have one. In this column, Early Show money maven Ray Martin says that can be a big mistake, and gives details on all aspects of will-making.

It's estimated that about 60 percent of U.S. adults don't have a will. It's understandable. No one likes to think about his or her own death, much less plan for it. A lot of folks think they don't have enough money to need one. And some folks just don't have the money to pay for the high price of legal advice and service to write a will. As proof, a smaller percentage of people with incomes below $75,000 has a will as compared to folks with higher incomes.

Most people know this is important, but may not think it's something they need to do until they're older or wealthier. But financial advisers will tell you this is not something you put off.

A will - formerly called a Last Will and Testament - is a written document typically prepared by an attorney, in which you (the writer or testator) specify how and to whom your property will be distributed. In a will, you also nominate guardians of minor children and name a personal representative and even direct trusts to be established for supporting children, education, or other special needs.

If you do not have a will, the courts will decide who will be the guardians of any minor children. This is typically the other living parent. But if there is no living parent (or the living parent is unfit or unwilling) the courts will appoint a guardian. If you want to nominate one, you need a will.

Also, without a will, your state's laws will determine how your property will be distributed. Most states divide assets by leaving a-third to half to the remaining spouse and the rest to any children or relatives. Some states even require leaving a share to the unborn child of an expecting spouse. If you pass away with a spouse and children and you have no will, your state's laws could leave your children and other relatives a larger share of your property than what is given to your spouse. That's hardly acceptable for most families, who may want all assets to go to the surviving spouse for use to support the families living expenses. The way to avoid relying on your states 'one size fits all will' is to write one of your own.

Who Needs a Will?

If you're single, have only a few assets -- a bank account, a car and little else -- you can probably do without a will for now. Even young couples with no children and modest assets, who title their accounts and home jointly and list each other as beneficiaries on retirement accounts and life insurance, can probably get by without a will. But even if this is your situation, if you care about how your property is distributed if you both pass away, then you will need to get a will.

Writing a Will
Writing a will for a simple situation isn't particularly complicated and you do not need an attorney to do it. Any adult of sound mind can make out a legal will. You can hand write it, prepare it using a computer program or use a legal document service. A basic will should include the following:
• Your name and address
• A statement that this is your last will and testament and that any prior wills are revoked.
• There should also be a declaration that the person establishing the will is legally competent and of sound mind. A will made under duress or during questionable capacity can be challenged or invalid.
• The name of your personal representative or executor -- the individual who has the responsibility to gather all financial information, keep records, pay debts and taxes and make final distributions. It's a big job, so chose carefully. Spouses typically chose each other, but you'll need to designate a back up to serve if both of you pass away.
• A direction that your personal representative will pay your debts and taxes.
• Include specific distributions of property, if any; special gifts of property to specific individuals, such as a gift of a piece of jewelry to a sibling.
• A provision to distribute remaining property to a spouse, children and/or other persons.

• Nominate a guardian or guardians: the individual(s) who will take care of any minor children. For many people, it's important to choose someone whose sense of values and beliefs are as close to their own as possible. Some people put off getting a will because they can't make that difficult decision. Don't get hung up here. Do the best you can. It's an easy process to change this portion of a will by a simple amendment called a codicil. It's best to limit the use of codicils to minor revisions to a will. Also, be aware that your selected guardian can decline the honor, so it's a good idea to also designate a backup.
• At least two witnesses (three in some states) must sign a statement that they observed you sign of the will. Make sure the witnesses are not beneficiaries under the will. If so, they may be disinherited.

Will with a Trust for Minor Children

If minor children are involved, it's important to think about who will take over the responsibility of your assets and how they should be managed. It may not be prudent to rely on the guardian to manage and distribute assets for your children. A guardian of your child and their assets who has children of his or her own could be tempted to use your child's assets to support their own children. Another issue with guardianships is that, when the child reaches legal age (18 in most states) the child owns all assets outright and can do whatever hr or she wishes.

Instead, consider a will with a provision that a trust be established to receive and hold any assets that pass to your minor children. You'll need to designate a trustee who will follow the trust provisions you've specified, making sure assets are managed for the children, and distributing investment income and principal for their needs (such as for clothing, food, shelter and education). Any remaining principal can be distributed in stages (such as at ages 25, 30 and 35). A trust can even specify that principal be distributed under incentive provisions, such as matching earnings dollar-for-dollar or as a reward for charitable work. It's often advised to name separate individuals as guardian and trustee, because it is a challenge to find one person with the best qualifications to be both.

Will with a Trust to Reduce Estate Taxes

In 2009, estate taxes on up to $3.5 million of asserts can be avoided by setting up a bypass trust, which can be done as either a provision in your will or in a standalone trust document. The trust would receive up to $3.5 million upon the death of the first spouse. The bypass trust can support the surviving spouse and children. After the second spouse dies, the kids could get whatever is left in the bypass Trust. It's hard to ignore the benefit of this planning. The taxes saved can be over $1.5 million, which is significant.

A trust can be a very good idea for other reasons, as well. For example, let's say you own a vacation home in another state. When you die, your estate must be administered in the state and county of your primary residence AND in all other states where you own property. But by owning the vacation home in a trust, it will avoid the probate proceedings in the other state. Another good reason to include a trust under a will is to provide for children or grandchildren with special needs. A special needs trust, which can be included as a provision under a will, can enable a trustee to provide financial support for the child while ensuring that the support will not interfere with their entitlement to other support benefits.

Get a Lawyer's Help

A lawyer can help you prepare a will and trusts that can help to manage special situations, such as the care of an aging parent or a disabled child. If you own a significant amount of assets and property, own a business, or are concerned about planning to avoid estate taxes, you should seriously consider seeking the advice and services of a legal professional.

According to a representative of the American Bar Association, while estate planning costs can vary, wills prepared by an attorney can often cost $800 to $1000. What you'll pay an attorney for your will depends on how involved or complex your situation is. How well have you thought out your wishes? Have you prepared an organized and detailed list of your assets? Are you seeking protection for potential future claims of creditors? Do you have unusual bequests? What is your health and what is the chance that the will could be challenged? Your answers to these questions and others will determine ultimately how much time and effort a lawyer will need to spend on preparing your will and trusts, and ultimately what the total cost could be.

Preparing a Will Yourself

Paying almost $1,000 for a will is a challenge for a lot of families, especially in these difficult economic and financial times. But there are several good services that can help to prepare a will or even do it for you for a very reasonable cost. If you have a simple estate, do not own property in another state, and have no complicated support needs and only simple bequests, you can probably write your own will or use the assistance of a legal documents service to do it for you.

Quicken WillMaker Plus 2008, a product of Nolo, the leading publisher of do-it-yourself legal books, is a will and legal documents-making package consisting of a book and a computer program. The book is a must-read if you are a first time will-maker, as it will help you understand the things you will need to input into the program, and the terminology and questions asked. QWM enables you to create wills, trusts, health care directives and powers of attorney that comply with your state's laws. There is even an update feature to keep the program current as states' laws change. The cost of the QWM package is about $50, a good value, especially if you will prepare legal documents for more than one member of your family.

Legalzoom, an online legal document service provider founded by attorneys, provides help in preparing legal documents that were developed by experienced lawyers. At Legalzoom.com, you can create a will online by answering series of questions with help offered along the way. The questions seem straightforward and easy to answer. There is also customer support available by phone and e-mail, and reports from users are that this is responsive and helpful. The cost of a will prepared by Legalzoom can be about $70 to $120, depending on the level of service and revisions you may need. That is very reasonable when compared to hiring a lawyer to prepare your will for you.

Another option is to get a will prepared by will shops popping up in malls around the country. At Walk in Wills, for instance, folks can meet with a lawyer for a free initial consultation. If they decide to have the lawyer prepare a will, the cost is a reasonable $249 for individuals and $349 for couples.

While capable of producing legal wills, trusts and other documents, the output of all these services is only as good as the person using the program. These are best used to produce documents for less complicated situations. If your will does not conform to your state's legal requirements, it will be invalid, and it would be as if you didn't have one. For example, in some states, a handwritten will is not recognized and any will must be properly signed and witnessed. These requirements vary from state-to-state. Will-making computer programs typically include the current requirements for all states, but laws can change before you use the program. If you do use one of these programs, it's still a good idea to ask an attorney for a review. Hoe or she can catch mistakes or may reduce his or her fees even if he or she draws up a new will for you.

Other Important Documents

While you're writing your will, consider other important documents, such as a Living Will, Health Care Power of Attorney and a Durable Power of Attorney. These documents state you intentions for medical care, and designate another to make decisions regarding your care and affairs.

If you travel and leave children with family or caregivers, consider a Temporary Guardianship of Minor Child and Child Care Authorization. These allow a caregiver to authorize specified medical care in the event there is a need while you are absent.

Naming children as contingent beneficiaries on retirement accounts and life insurance policies could be a mistake, especially if you've taken the time to write a will. Instead, complete new Beneficiary Change Forms designating your estate or trust as the contingent or second beneficiary. That way, the trust receives the benefits and the children are provided for according to the terms in the trust.

Where to Keep your Will
Keep your documents in a safe and accessible location such as a fireproof home safe or a lawyer's vault. Do not store them in a bank's safety deposit box, because banks are typically required to seal these after notice of the death and may require a court order and supervision to open.