Several weeks ago, my wife gave birth to twins. After the excitement died down and all the thank-you notes were written, I finally got around to looking at my will. Written in 1993, it was out of date, and not just because I had four children instead of two. It also didn't take into account the increase in my family's net worth. Nor had I completed a living will, which provides instructions in the event that I'm incapacitated.
All the estate planning in the world is meaningless if you don't have a will or if it is out of date. A will is a legal instrument that spells out to whom your assets are to be distributed when you die. It also names a person, known as an executor, who is in charge of making sure your wishes are carried out. If you die without a will, a probate judge determines who inherits your assets, and the court distributes your property according to the laws of your state--which could vary greatly from your actual wishes. For example, your property may be split between your spouse and children, leaving your spouse with insufficient funds to live on. Dying without a will, or "intestate," can also lead to litigation between potential heirs, as they fight over your assets.
Worse, in many states, a will is the only legal way a parent can designate a guardian for a minor child. Should you fail to designate a legal guardian for your children and they become orphaned, the court will appoint someone. Your child could be raised by someone you don't like, or don't even know.
This can easily be avoided because preparing a will is relatively inexpensive and not very time-consuming. If you use an attorney, the average cost is $300 to $1,000--about the same you would pay your accountant to do your taxes--depending on the complexity of your estate. Get a recommendation from a friend, or your state bar association can refer you to an estate planning attorney in your area.
PC PREPARATION. If your affairs are fairly simple--for instance, your net worth is under $600,000 and your only beneficiaries are a spouse and children--then you might consider using one of the several computer software packages to prepare your will. Even if your affairs are more complicated, the software can still be a good place to start. The programs can help organize your data so that your attorney needs to spend less time with you, thus lowering your legal fees. Nolo Press, a legal publisher, produces a number of software titles, including WillMaker 6.0, with versions for Windows and Macintosh ($49.95). Another helpful software package is Quicken's Family Lawyer ($29.95). There are also a number of excellent books for lay people. One is The Will Kit, by John Ventura (Dearborn Financial Publishing, $17.95). Another is The Quick & Legal Will Book, by Dennis Clifford (Nolo Press, $15.95).
The first step when writing your will is to take a financial inventory--your income, assets, debts, life insurance policies, the deed to your house. You may discover that you have more than you thought you had and that your estate (if more than $600,000 for individuals, $1.2 million with a spouse) will be subject to federal and state taxes. If so, it's a good time to consider establishing trusts.
Next, assemble your legal profile. This includes copies of prenuptial agreements, divorce decrees, any wills and trusts you already have, business partnership agreements, and so on. Not all property can be given to your beneficiaries through a will. For example, property such as a home that you and someone else jointly own together with right of survivorship cannot be conveyed by a will. Instead, the asset automatically goes to the owner who survives you. Also collect the names and addresses of all beneficiaries, including your favorite charities. Finally, you'll need the name and address of the person you designate as executor of your estate.
Review your will every two years, or in the event of a move to another state, birth of a child, marriage and divorce, among other things. It may not be necessary to rewrite the entire document, just salient parts.
Something else to consider is a living will. It provides instructions in the unfortunate event that you become seriously ill and can't make your own medical decisions. A living will states your wishes concerning the use of life-sustaining respirators, other machines, and medications. You can use a living will to instruct doctors as to when they should or shouldn't resuscitate you. "We at least want you to designate a person to make those medical decisions for you," says Donna Muehleck, an attorney with Stoel Rives LLP, a Portland (Ore.) law firm. "We want to avoid having somebody go to court to declare you incompetent."
Deciding who gets what after you die isn't a pleasant task. However, it is better that you decide than someone else.