Welcome to Estate Planning 101 – Chapter 2: What is a Will?
In Chapter 1 of Estate Planning 101, we briefly covered the basics of estate planning, generally, and the various aspects and documents that can be involved in your estate plan. In Chapter 2 we’re going to dive in just a little bit deeper and learn more about what many often (sometimes mistakenly) view as the primary aspect of an estate plan: the will (aka the Last Will and Testament). We’ll do this by answering some Frequently Asked Questions about wills.
Before I continue, I implore you to revisit Chapter 1 to review the very basics of estate planning. I’ll wait.
Got it? Okay great, moving on!
Like we did in Chapter 1, let’s start out our discussion of wills by defining certain terms, because before we can have a conversation about wills, we all need to know what a will actually is.
What is a will?
A will is essentially a document that says what you want to happen to your assets when you die.
What can/should my will say?
There’s a lot that you can/should have in your will, but at the very least, you’ll need to name two people, or groups of people. You’ll need to name your Executor/Executrix, and you’ll need to name one or several Beneficiaries.
What is an Executor/Executrix?
Your Executor (male) or Executrix (female) is the person you appoint to be responsible for carrying out the terms of your will. What does that mean? I like to make the comparison to a football or basketball coach who draws up a play, but can’t actually be the one to carry out the play. So, let’s say you’re a football coach and you’re preparing for the big game. In the week leading up to the game, you draw up some plays to be used in different situations, and you compile these plays into one book: your playbook. Your will is essentially your playbook for what happens to your stuff when you die. But, just like the coach can’t step onto the field and actually run the plays, you can’t actually carry out your own will. You need to name someone else to actually run the plays that you’ve called in your will. In football, that’s your players. In your will, you name your Executor (if male) or Executrix (if female).
What is a Beneficiary?
The other type of person you need to name in your will is a Beneficiary, or a person who will inherit your assets (your stuff). You can have one beneficiary or you can have multiple. You can write your will so that certain assets pass to certain beneficiaries. (These are called specific gifts or bequests). Or you can write your one or several beneficiaries just get everything. Really, who your beneficiaries are, and who gets what is entirely up to you. However, even though the decision is entirely yours and there are few limits as to who can be a beneficiary and what a beneficiary can receive, it is still in your best interest to consult with an attorney who may be able to advise you on tax implications of naming certain beneficiaries.
What else should I include in my will?
- Alternates. When naming an Executor/Executrix or a Beneficiary, it’s very important that you consider alternates. For example, I would name a primary Executor, and an alternate Executor, in case my primary Executor dies before I do. Same with Beneficiaries. If I want my car to go to Cathy, I should make sure I have an alternate beneficiary in case Cathy is already dead. You should always name alternates in your will.
- Burial instructions. For example, if you wish to be cremated, this wish should be memorialized in your will.
- Guardians. If you have minor children, you should consider what would happen in the event that both of your children’s parents are deceased. Who would you want to be their guardian? You can (and should) do this through your will.
- Anatomical gifts. You may already have “Organ Donor” written on your driver’s license, but it’s wise to reiterate such in your will. You can also gift specific body parts to specific recipients. For example, if I want a particular research hospital to receive my brain or my heart for study, I can do this by my will.
- Pets. Who do you want to take care of your pets? You can name guardians of your pets in your will.
- Trusts. Do you want your beneficiaries to receive their entire inheritance immediately, or when they reach a certain age? Maybe you want your beneficiary to receive their inheritance not in lump sum, but in installment payments over a set period of time. Maybe you want a minor child to be the beneficiary of a trust that provides for their education, but the principal of which is not accessible until they reach a certain age. This can be accomplished through your will.
Why should I have a will?
Because having a will allows you to decide what happens to your assets (not to mention your children, pets, body, etc.) when you die. You can decide who receives your money, who receives your real estate, who receives your car, etc. You can also decide who does not get any of your assets. You should have a will because you worked to build your wealth and asset portfolio, so you should get to decide what happens to it after you die.
What happens if I die without a will?
Dying without a will is referred to as dying “intestate”. What’s it called when you die with a will? Any guesses? If you guessed dying “testate” then you’d be correct.
Pennsylvania has very detailed and rigid intestacy laws. That means that if you die intestate, then what happens to your assets is pre-determined by Pennsylvania law. If I die without a will, my wife does not get to say what happens to my stuff. Pennsylvania law gets to say what happens to my stuff. As a result, there really isn’t any uniform answer to “what happens if I die without a will?” The answer is different if you’re married as opposed to single, with children as opposed to without children, with debt as opposed to without debt, and on and on.
What happens with my will after I die?
Often, for whatever reason, my new clients tend to have a misconception about how to actually care for their will. Probably the most common misconception is that once we write the will, we file the will with government. That’s not the case. Really, until you die, you’re responsible for taking care of your will. But what about what happens after you die? Then what happens? Well, not always, but more often than not, after you die, your will gets “probated.” What does this mean?
It means that after I die, my Executrix will go to the Register of Wills office in Montgomery County (my county of residence) and will submit my will, along with my death certificate and other paperwork to the Clerk at the Register of Wills. There, the Clerk will review the will, make sure it is legally valid, make my Executrix swear an oath that she’ll carry out the terms of my will, and finally, the Clerk will give my Executrix “Short Certificates.” These Short Certificates are what allow my Executrix to do things like close my bank account, open up an estate account, etc.
So you’re saying that after I die, my Executor can’t just take my will and death certificate to my bank and close out my account?
Correct. Why? Well it’s really a matter of public policy.
If my Executrix could simply take my death certificate and my will into Wells Fargo and close out my accounts on her own, then the responsibility of determining the validity of my will would fall in the hands of a Wells Fargo employee. Maybe you’re okay with the Wells Fargo employee determining whether your will is legally valid, but I’m sure not, and neither are our lawmakers. Our lawmakers long ago decided (for good reason) that we did not want such critical decisions to be made by bankers, title agents, etc. We want the validity of my will to be determined by those who are most familiar with the laws that determine the validity of a will, judges and clerks at the county Register of Wills office.
Great! Thanks for all that info. Now can I just go write my own will?
Technically, yes. You can write your own will. At the same time, you can also climb Mt. Everest on your own, too. However, I strongly advise against doing either one without seeking professional guidance. There are many potential pitfalls to writing your own will, but there are really two main reasons why I never recommend writing a will on your own.
First, there a lot of laws regulating wills and whether a will is “legally valid.” For example:
- Did you sign the will?
- Were there witnesses?
- Were they the right witnesses?
- Did you need witnesses?
- Did you sign in the right place?
- Did you edit your will?
- Is your will handwritten or typed?
- Is it the original will or a photocopy?
There are a lot of rules to this game, and it’s not a game you want to play without the help of someone who knows the rule book pretty darn well.
The second, but most important reason why you shouldn’t write your own will is because, as you’ll recall from Chapter 1, your will is only one small part of your estate plan.
Your estate plan is made up of various parts; your will is just one of those parts. You want to make sure that your will is working seamlessly with the rest of your estate plan in order to carry out your goals. A good estate planning attorney will likely be able to offer solutions to estate planning issues you didn’t even know you had.
For example, if you’ll remember from Chapter 1, your will only controls your “probate” assets. Your will does not control your “non-probate” assets. A lawyer can make sure your will and your non-probate assets are working together to meet your end of life goals, and ensure that your loved ones are taken care of, while reducing their tax liabilities.
You’re only telling me not to write my own will so that I’ll pay you some crazy amount of money to write a will for me. I’m not falling for this trick.
Okay well… that’s not really a question, first of all.
Secondly, no tricks here. All of the concerns and issues I’ve discussed in this chapter are very real and we see them far too often. One future chapter will be devoted solely to the catastrophes that we have seen as a result of people trying to write their own wills, including how expensive it was to fix the error (if it was able to be fixed at all) and how easily the error could have been avoided in the first place.
Finally, an estate plan (including a will) is probably not as expensive as you think it is. Many estate planning attorneys can probably help you prepare an estate plan for a very nominal fee. Paying for a proper estate plan is like buying an insurance policy. You’re paying a small fee now, (very often for only a few hundred dollars) to reduce potential problems in the future, and for the peace of mind of knowing that your loved ones will be provided for just the way you want, with as limited a tax liability as possible.
This has been a very basic overview of wills. Stay tuned for future posts that will go into more detail about wills. And stay tuned for Chapter 3, which will be a discussion of Powers of Attorney!
As always, if you have any questions about estate planning, please feel free to contact me.