Estate Planning 101

February 12th, 2013 posted by Pamela J. Fratini

Part I: Get Over It

Spring

It comes every year. Just like death and taxes, it’s something we know is coming and can’t do anything about. It’s a time when we tend to reflect on our recent New Year’s resolutions, decide which of those to save for next year, and which to pursue. We make appointments for check-ups and tune-ups. We change the oil in the lawn mowers and sharpen their blades. Thinking about estate planning is no different. I’m not saying that you need to revise your entire estate plan every year but it’s really a good idea to think about it carefully, at least annually, and make whatever changes may be necessary (i.e., birth and/or adoption of child, divorce, etc.). For the record, an “estate plan” is just a colorful legal term for the process of arranging for what’s gonna happen to your stuff (your estate) in the unlikely event that you overdose on chocolate (but what a way to go!), and wake up at the Pearly Gates. You won’t be going back home at that point, and no, you won’t be in Kansas anymore, Toto. But before you can revise your estate plan, you must first have one. Most of us are aware that we need a will , yet a whopping 70% of Americans don’t have one. Why is that? We buy medical insurance, dental insurance, car insurance, and life insurance because we like the “peace of mind” those insurance policies provide. But, unlike wills (and other estate planning documents which have a really bad rap), which provide for our loved ones only after we DIE, we buy the insurance policies for “protection” of our material possessions, of our health, and of our lives while we’re healthy and have at least some level of material comfort. So, the first thing you need to do is GET OVER IT. At some point you will die. Go ahead and keep saying it to yourself and if you’re still uncomfortable with the notion after finishing off the last of the candy you swore you’d never eat anyway, grab yourself a nice cup of something warm, come back here and relax. Making a will has not been medically proven to have caused an unusual number of untimely deaths, and it doesn’t even have to be expensive or terribly complicated.

Intestacy

Let’s say that after you finish this article, you get up for more nourishment and slip on the freshly waxed kitchen floor. You die. You die while thinking about making your will. What would happen is that state officials in the state in which you reside would make all decisions regarding your stuff (and possibly your loved ones), according to a statutory formula. This process is called “intestate succession.” All of your real and personal property would be distributed to your spouse and children or to other relatives according to that statutory formula. At the end of the chain, if no relatives can be found to inherit your property, your stuff is liquidated (sold) and the money from the sale generally goes into the state’s bank account (appropriately termed “escheat”). More importantly, if you have young children and their other parent dies while taking you to the emergency room, or is otherwise or unfit to care for them, some judge will make that decision for you, too. Get over it. It is CRUCIAL that you understand the reasons that some of your property will go to someone other than one or more beneficiaries named in your will. This transfer “by law” would happen in cases where, for instance, you’ve named a specific beneficiary on an insurance policy. The beneficiary named on the insurance policy would receive the proceeds but not because of probate law. Rather, the insurance policy is a CONTRACT between you and the insurance company whereby the insurance company agrees to pay to the beneficiary named on the policy a certain number of dollars when you die. Those insurance proceeds DO NOT pass through your will. If nothing else, it is VITAL that you remember that. One last thing before we move on: if you’ve transferred any real or personal property to a living trust, you shouldn’t include that stuff in your will, either.

Lawyers

Group groan…. The truth is plain and simple: making a will rarely involves complicated legal rules, and most of you can safely draft your own will — with the assistance of some really good resources. Let’s say that you have a home, and that you and your spouse have some mutual fund investments. You also have an education fund set up for each of your children. And you also have some treasured personal items that if, you weren’t here to have them, you know you’d like someone close to you to have it for special reasons. You might also own a small business or some additional real property. And, most importantly, let’s say you have two kids. You’ll want to name a guardian to take care of them and a trustee to manage any property they might inherit. Okay, now you’re ready to make your will. About the only things to keep in mind are the insurance proceeds issue and the fact that more likely than not, your spouse (legally, only the person you’re married to … and your marriage must have been valid in the state in which was performed at the time it was performed) — that person has the “statutory” right to claim a certain amount of your property when you die. Aside from that, you can pretty much divvy up your stuff any way you like, and as long as you include certain statutory language (which is easily and freely available), you don’t need fancy legal terms to do it. There are plenty of valuable resources available in all manner of formats. Just make sure that you do your homework. If say, in a couple months, you get frustrated over a particular issue and you’ve done your homework, studied the forms to make sure that they say what you want them to say, exhausted your research and resources, and you still have questions — you may wanna bite the bullet and call a lawyer. The stress isn’t worth it. And always keep in mind, too, that even if you DO call a lawyer, you don’t have to give up your efforts! You wouldn’t have to relinquish the whole thing. Just ask your questions, get your answers, and finish the will yourself. Please keep in mind that if you opt for this avenue, you must take an active part in the learning process! Get yourself a really good self-help book or two and/or take a look at the software that’s out there. You can also find some really great legal resources on the internet (findlaw.com, versuslaw.com, legaldocs.com). If you decide to hire a lawyer , find one who is knowledgeable about wills, charges a reasonable fee, and will respect your efforts to make your own will. This may not be easy, but it shouldn’t be impossible. The best place to start checking is probably with your local attorney referral services or your local county bar association. Check the Yellow Pages and search the web. Attorneys’ fees vary widely from state to state, and even within the same state depending on your location. Nevertheless, you should be able to find a good lawyer who will prepare two simple wills for you and your spouse for $350.00 or less.

Some Technicalities

Any adult (most states impose an age requirement of 18 years to be classified as an “adult”) of sound mind (that would be you, the person reading this article) is entitled to make a will. In addition, under most (if not all) state statutes, the will must: (a) be typewritten or computer generated (unless it’s a valid handwritten will — below); (b) state specifically that it’s your will, and you must specifically state to the witnesses that it is your will (“publishing” the will); (c) be signed and dated by you (I recommend that you also initial each page); and (d) be signed by at least two (and in some states more) witnesses (NOTE: generally, the testator/testatrix AND all witnesses must ALL watch each other sign the will, although it’s not necessary that the witnesses read the will; also note that in most states your witnesses must be people who are not beneficiaries under your will). It’s not an absolute requirement that your will be notarized , but if you and your witnesses sign an affidavit (sworn statement) before a notary public, you can help simplify the court procedures required to prove the validity of the will after you die (called a “self-publishing” will). So, I recommend it. You don’t need to record or file your will with any court or any governmental agency, but it can be done in a few states. Just make sure that you keep your will in a safe, accessible place, and be sure the person in charge of winding up your affairs (your executor) knows where it is. There are some things you really “shouldn’t” include in your will . That would be things like funeral instructions (your will typically isn’t read for days or even weeks after a death) and that’s too late to help the people who must make immediate decisions about the disposition of a body and funeral or memorial services. Instead, make your wishes known to your family and close friends, make a separate document documenting those wishes, and tell your executor where to find it when the time comes. You also shouldn’t (i) leave money for illegal purposes, (ii) name beneficiaries for certain kinds of property (i.e., joint tenancy, life insurance proceeds, etc.), and/or (iii) include certain restrictions on the gifts and/or the beneficiaries. It is perfectly okay to OMIT certain persons from your will (i.e., “disinherit” them, cut them outta your will ~), and those provisions are valid provided that you’ve done your homework!

Handwritten Wills

Handwritten wills, called “holographic” wills, are legal in about 25 states. To be valid, a holographic will must be written, dated, and signed in the handwriting of the person making the will, but they typically do not need to be witnessed and/or notarized. You might be able to get some valid fill-in-the-blank forms from your local office supply store. Just make sure you Read The Manual! Always remember to sign and date your will. If you have very little property, and you want to make just a few specific bequests, a holographic will is better than nothing if it’s valid in your state. Unlike regular wills, holographic wills are not usually witnessed or notarized so if your will were to be challenged, the court may be unusually strict when examining it. It’s better to take a little extra time to write a will that will withstand close scrutiny by a court who doesn’t know you or anything about your family, than to take chances. Many states, including Indiana, Illinois, and Kentucky, require that attorneys add the statement “THIS IS AN ADVERTISEMENT” on publications of this nature. This publication is intended for general information only and not as legal advice. You should discuss specific details with your attorney to determine how this information may apply to your situation.

Copyright © 1999. All rights reserved. Pamela J. Fratini and Legal Grounds, LLC For more information about these or other probate issues, contact me toll-free at 877.HAVEONE or email me @ [email protected]


about the author Pamela J. Fratini is a recovering in-house corporate lawyer, being held captive by four felines, offers ransom to serious readers. Sense of humor a must. Those without one need not apply.



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