Most people should have a will, but it’s rarely the most significant estate planning document an individual holds.
Many of a typical household’s assets, such as retirement accounts, can be transferred outside of a will by naming beneficiaries, and documents such as the financial and medical powers of attorney can be more powerful in determining the outcome of an estate.
Still, having a poorly written or out-of-date will can be costly and derail an otherwise well-planned estate. Wills are also particularly important for individuals with dependent children; the will serves as the best means to name guardians for children in the event of the death of both parents.
Experts typically advise individuals to get the basic estate planning documents in order around the time they are married or buy a home, for example, and revisit the will regularly with special emphasis on this process around the time of retirement. Get started and complete your will in 10 simple steps:
— Find an estate planning attorney or use a do-it-yourself software program.
— Select beneficiaries for your will.
— Choose the executor for your will.
— Pick a guardian for your kids.
— Be specific about who gets what.
— Be realistic about who gets what.
— Attach a letter to the will.
— Sign the will properly.
— Find a place for your will.
— Review and update your will.
Find an Estate Planning Attorney or Use a Do-it-Yourself Software Program
Individuals or families with relatively simple financial situations may be able to use an online, reputable software program to complete their wills. Some software programs to consider include:
Many situations, however, will require an estate planning attorney.
“There are so many rules that come into play,” says Patrick M. Simasko, an elder law attorney in Mount Clemens, Michigan. “They can’t make it to the lawyer or they go onto LegalZoom, which is great, and they prepare their own documents, go to a website, download the will or they download trusts or different forms. But they don’t know how to fill them out right, sign them right, notarize them right, so they don’t mean anything.”
Hiring an attorney to create basic estate planning documents may cost a few thousand dollars, while an online software program can cost $100 or less. However, experts warn that improperly prepared documents can be costly down the road.
One common mistake individuals make when planning their estate is failing to name or update beneficiaries on key accounts that work with the plans outlined in their wills.
“What’s listed on all of the bank accounts, the life insurance, the house, that controls what goes where,” Simasko says. “The beneficiary listed supersedes the will, but often there’s just no consistency.”
Choose the Executor
The executor of your will is responsible for carrying out the wishes expressed in it. This person is often a family member or an outside individual who should be responsible and detail-oriented.
“If you have no children, no nephews or nieces, you can always name your attorney or CPA,” says Brian J. Decker, owner and founder of Decker Retirement Planning, which has multiple locations on the West Coast. “One big no-no is a corporate trustee because of the expense. They charge 1% of the estate every year even if they do nothing, and they require you to have all your assets with them, so it’s a double dip.”
Pick a Guardian for Your Kids
It’s important for individuals with dependent children to name a guardian in their wills. While it’s not required that you ask permission before naming someone as a guardian, it is a common practice to name multiple guardians in case one of those named is not able to accept the responsibility of guardianship.
Be Specific About Who Gets What
One of the most time-consuming aspects of creating a will may be deciding which assets to include and determining who will receive what. Stanley Kon, co-founder and chairman of Ripsaw Wealth Tools in Colorado, says individuals should consider the types of assets being allocated to heirs to help with decision-making and management.
“Grandchildren will have a very long-term investment horizon and have more risk tolerance than their children,” Kon wrote in an email. “An educational fund will likely have a much shorter investment horizon with less risk tolerance. This process can be used to separate what amount you need to fund your expected remaining life from what you expect to provide beneficiaries and manage accordingly.”
Be Realistic About Who Gets What
It’s important to think practically about how assets will be distributed. The No. 1 reason children stop speaking after a parent’s death, Decker says, is due to boilerplate language directing tangible assets, such as artwork or jewelry, to be divided equally among children.
“If you have three kids who all play the piano and have this boilerplate language, the first one is going to pick the Steinway,” he says. “You can’t divide tangible assets equally. You will have kids who have strained relationships after the estate is distributed because of this.”
Attach a Letter
Individuals can attach an explanatory letter to their will. This letter may serve as a personal way to say goodbye and also go into more detail about certain wishes.
Sign the Will Properly
Incorrectly executing a will may lead to it being deemed invalid. Witnesses must sign your will, and in many states, the witnesses can’t be people who stand to inherit anything in the will. Your witnesses also need to be at least 18 years old.
Ideally, they’ll be people who are likely to be around when you aren’t. If something goes wrong and your will is contested in court, the judge may want to call a witness to testify. The number of witnesses needed may also vary by state.
Find a Place for Your Will
Make sure someone you trust knows where to find your will as well as any other important papers and passwords to financial institutions. It’s also a good idea to store the original copy somewhere secure, such as in a fireproof safe.
In some cases, wills can be stored and even executed electronically. These electronic wills, or e-wills, are valid only if they meet certain requirements, such as being in text form, not audio or video, and meeting state rules about whether witnesses are physically present or remote.
[Read: How to Write a Will Online.]
Review and Update Your Will
Generally, wills should be updated every five years, says Daniel R. Bernard, a partner at Twomey, Latham, Shea, Kelley, Dubin & Quartararo LLP in New York.
“Similar to getting your car’s oil changed every three thousand miles, this doesn’t always happen,” Bernard wrote in an email. “Another good rule of thumb is, any time you have a major life event, the birth of a new child or grandchild, a divorce, or the death of a spouse or parent, for example, it is a good time to review your documents.”
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Update 05/13/21: This story was published at an earlier date and has been updated with new information.