What is a Will?
What is a Will, and What Does it Cover?
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children after your death. If you die without a will, those wishes may not be carried out. Further, your heirs may end up spending additional time, money, and emotional energy to settle your affairs after you're gone.
Though no single document will likely resolve every issue that arises after your death, a will—officially known as a last will and testament—can come pretty close. Here's what you need to know about these vital documents.
Key Takeaways
- A will is a document that contains your direct wishes for your property and assets, as well as the care of your dependents.
- Failure to prepare a will typically leaves decisions about your estate in the hands of judges or state officials and may also cause family strife.
- You can prepare a valid will yourself, but you should have the document witnessed to decrease the likelihood of successful challenges later.
- To be completely sure everything is in order, consider having your will prepared by a trusts and estates attorney.
Why You Should Have a Will
Some people think that only the very wealthy or those with complicated assets need wills. However, there are many good reasons to have a will.
- You can be clear about who gets your assets. You can decide who gets what and how much.
- You can keep your assets out of the hands of people you don't want to have them (like an estranged relative).
- You can identify who should care for your children. Without a will, the courts will decide.
- Your heirs will have a faster and easier time getting access to your assets.
- You can plan to save your estate from paying money on taxes. You can also give gifts and charitable donations, which can help offset the estate tax.
A Written, Witnessed Will Is Best
To maximize the likelihood that your wishes will be carried out, create what's known as a testamentary will. This is the most familiar type of will; you prepare the document and then sign it in the presence of witnesses. It's arguably the best insurance against successful challenges to your wishes by family members or business associates after you die. You can write a will yourself but having it prepared by a trusts and estates attorney tends to ensure it'll be worded precisely, correctly, and in keeping with your state's laws.
Other Types of Inheritance Wills
While a testamentary will is likely your best bet, several other types of wills get varying degrees of recognition.
Holographic Wills
Wills written and signed by the testator but not witnessed are known as holographic wills—from the less common secondary meaning of the word holograph, which is a document hand-written by its author. Such wills are often used when time is short and witnesses are unavailable—for example, when the testator is trapped in a life-threatening accident.
Holographic wills are only recognized in half of the states, however. In states that permit the documents, the will must meet minimal requirements, such as proof that the testator wrote it and had the mental capacity to do so. Even then, the absence of witnesses often leads to challenges to the will's validity.
Oral Wills
The least widely recognized are oral wills, in which the testator speaks their wishes before witnesses. Lacking a written record, or at least one prepared by the testator, courts do not widely recognize oral wills.
Pour-Over Wills
Another type of will, a pour-over will, is used in conjunction with creating a trust into which your assets flow. (See "Wills and Trusts," below.)
Mutual Wills
A married or committed couple usually executes this type of will. After one party dies, the remaining party is bound by the terms of the mutual will.
Mutual wills can be used to ensure that property passes to the deceased’s children rather than to a new spouse. Because of state differences in contract law, a mutual will should be established with a legal professional's help. Though the terms sound similar, a mutual will should not be confused with a joint will.
What Does a Will Cover?
A will allows you to direct how your belongings—such as bank balances, property, or prized possessions—should be distributed. If you have a business or investments, your will can specify who will receive those assets and when.
A will also allows you to direct assets to a charity (or charities) of your choice. Similarly, if you wish to leave assets to an institution or an organization, a will can assure that your wishes are carried out.
While wills generally address the bulk of your assets, some aren't covered by their instructions. Those omissions include payouts from the testator's life insurance policy. Since the policy has specified beneficiaries, those individuals will receive the proceeds. The same will likely apply for any investment accounts that are designated as "transfer on death."
There's a key exception: If the beneficiaries of those assets predeceased the testator, the policy or account then reverts to the estate and is distributed according to the terms of a will or, failing that, by a probate court—a part of the judicial system that primarily handles wills, estates, and related matters.
Most states have elective-share or community property laws that prevent people from disinheriting their spouses. If a will assigns a smaller proportion of such assets to the surviving spouse than state law specifies, which is typically between 30% and 50%, a court may override the will.3
In addition to directing your assets, a will states your preferences for who should take over as guardian for your minor children in the event of your death.
For more information about wills, including: getting started on your will, choosing an executor, where to keep your will, and how to make changes to your will, please contact Esquire Risa Hall today!
Author: Lisa Smith via Investopedia
