Most people have heard about wills. In fact, many people have a passing acquaintance with estate planning and the documents that make up the estate plan. They hear terms like wills, trusts, healthcare directives, HIPAA Authorizations, powers of attorney, deeds, and wonder, what are they? What do they mean? What is the purpose of these documents?
Over the next few days, I present a brief introduction to each of them. For now, this post addresses the will. In Day 9, we will look at trusts. In Day 10, we will look at the Healthcare Directive. In Day 11, the HIPAA Authorization. In Day12, the Power of Attorney, and in Day 13, we will look at the real property deed.
What is the Will and what is its Purpose?
It is a written document, a legal instrument that is signed and witnessed by the testator, the person creating the instrument. Since wills and trusts law is defined by each individual state, the state and not the federal government gets to determine the rules. For the sake of simplicity, I focus here on California law. That said, I encourage you to research the law in your state.
- Holographic Wills. The Holographic will is one where all material provisions and the signature are in the testator’s handwriting. This type of will doesn’t need to be signed by witnesses. While it doesn’t need to be dated, if it is not and there is a question of inconsistency, the will can be deemed invalid. For that reason, it’s suggested if you have a holographic will that you date it.
- Statutory Wills. California offers a statutory form. As long as the testator is at least 18-years old and of sound mind, they can execute a statutory will. Here is an example of a statutory will. For a statutory will to be valid in California, the following must exists:
- All blank spaces must be completely filled out in the in the testator’s handwriting.
- The statutory will must be signed in the presence of two witnesses, who then must sign in the testator’s presence.
- The will must be personally signed by the testator.
- Attested Wills. These are prepared by lawyers. They are generally preferred, because they are vetted by an attorney. Trusts and estate law is complicated and then you add the element of tax law. For that reason, a lawyer who is knowledgeable in the area of trusts and estates is needed to unravel the complicated provisions.
Here are some benefits of a will:
- Name guardians for minor child. A will can be used to name guardians to care for minor children. And depending on the law of your particular state, there may be an additional writing that can be used to name a guardian.
- Specify an executor or personal representative. A will allows you to name an executor or personal representative. Where there is no trust, the executor of the will is the person responsible for bringing to conclusion your affairs after you die. Such actions generally include working with the probate court, gathering all of your assets including accounts and property, protecting those accounts and property, paying your debts, and giving what remains to your named beneficiaries. But, if there are no accounts or property in your individual name (because you have a fully funded revocable trust), this feature is not necessarily useful.
- Provides for the division and gifting of your accounts and property at death, but not accounts and property directed to others through beneficiary designations (e.g. life insurance or retirement benefits)
- Tends to cost less than a trust on the outset but may cost more to settle during court proceedings after death
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