LETTERS From CAMP Rehoboth |
CAMP Money: Keys to a Comprehensive Will |
by Alexander G. Yearley, CFP |
A survey in August 2001 by the Web site FindLaw found that six in ten adult Americans did not have a will, especially younger adults. Less than a month later the terrorist attacks of September 11 made many Americans acutely aware of their mortality and the need for a will, particularly after realizing that so many young people with young families died in the attacks. A will is a legal document that details where you want your estate's assets to go (after debts and taxes are paid) and who is going to oversee the execution of the will. It may also state who is to take care of your minor children, though you may use a separate document called a declaration of guardianship. A will provides many benefits. Without one, the laws of the state will determine where your property is distributed. Your heirs, whoever they are, could end up with less than you planned. The assets could be poorly managed after your death and leave little for anyone. Your estate could end up paying more in taxes and legal fees than necessary. Although writing your own will can save money, an improperly drafted or witnessed will might lead the court to reject it as invalid, heirs to challenge it, or you may simply forget to include important information in the document. Each person's circumstances are different, and require different drafting requirements. State laws also vary significantly, so the will must reflect the particulars of that state. That is why Certified Financial Planner professionals generally highly recommend having a local estate planning attorney draft the will. Assets pass from an estate in three ways, by will substitute, by will, and by operation of law in that order. The will substitute is the most common. This is property held in joint tenancy with right of survivorship or named beneficiaries of life insurance, retirement accounts, bank accounts etc. Be sure to keep such designations up to date as a will does not override them. Especially for unmarried couples keeping the will substitutes and the will saying the same thing is critical if family objections are expected. The will designates where all the other assets go. This process is supervised by the Probate Courts and is made public. Carefully name an executor in your will. An executor oversees the carrying out of the particulars of the will and settles the estate, making sure debts and any estate taxes are paid. Name someone who is willing, trustworthy and capable. Also name a successor to serve if the primary executor cannot. Be sure to give the executor the powers they will need to carry out the will. For instance, if a house must be sold the executor must have that authority to do so. Otherwise the court must be petitioned resulting in needless delay and cost. A will also may be used to designate precisely who is to receive personal property of high sentimental but little monetary value, such as a favorite set of golf clubs or family furniture. Some attorneys prefer a separate letter of instruction instead of the will for this type of detail, because it reduces the cost of rewriting the will each time you decide to make changes. Either way, these documents can minimize a lot of squabbling among heirs. Make sure interested parties have a copy and know where you keep your will. The will should take care to address potential estate taxes. Keep in mind that under the new tax law the amount of estate assets exempt from taxes ($1 million in 2002) increases several times in the coming years. Estates with more than the exemption should seek professional estate planning help to reduce or eliminate estate taxes by more sophisticated techniques such as trusts, a topic beyond the scope of this article. Be certain to review and possibly revise your will when key events occur, such as a beginning or end of a relationship, the birth of a child, marriage, divorce, death of an heir or executor, retirement, or move to another state. If no such events occur it is still a good idea to review a will every five years or so to see if everything still fits together noting that estate tax laws change periodically. If there is property not covered by will substitute and no will exists or can be found, operation of state law takes over. This should be an area of great concern to single and partnered people. The law virtually always gives estates to blood relatives. That may be fine, but if it isn't, get to work and do something about it like writing a will. This column is produced by the Financial Planning Association, the membership organization for the financial planning community and is provided by Alexander G. Yearley, CFP, and a local member in good standing of the FPA. Mr. Yearley runs Community Pride Financial Advisors at 39 Baltimore Ave., Rehoboth Beach, DE 19971, and offers securities through Cambridge Investment Research, Inc. Member NASD and SIPC. |
LETTERS From CAMP Rehoboth, Vol. 12, No. 02, March 8, 2002. |