Will And Testament
Introduction
A will is a legal document that details your wishes regarding the distribution of your property and assets after your death. It also sets out the care of any minor children and dependents you may have. A will is a critical document that every adult should have. Granted, writing a will is not the easiest of undertakings.
However, the alternative of not having a will is not desirable to anyone. Your wishes may never be honored as they are not documented, and your property and assets are handled and distributed according to the laws of your state.
There are various types of wills that we shall be looking at in this guide. We shall also look at the legal requirements of a will, how to prepare a will, standard terms used in wills, elements of a will, updating a will, and where to keep your will among many other valuable insights that will help draft a will that meets both the legal requirements in your state as well as reflect your wishes in regards to how your assets will be distributed after your death.
Part of putting your affairs in order is writing a will. It gives you the peace of mind that your wishes will be respected. You rest easy knowing that what you have worked hard for all your life will end up in the right hands. It also avoids the lengthy, time-consuming, expensive, and emotionally draining probate process that takes place when you die without a will.
Definition of Terms
It is highly advisable to write a will in plain English that doesn't leave room for alternative interpretation. However, there are some standard legal terms that you will find in wills that you need to know.
Will - A legal document that details how your assets and other personal belongings will be distributed upon your death.
Testator - This is the person who writes a will or signs it. can also be called a will-maker.
Beneficiary - People named in the will who will benefit from the assets of the deceased. They may be named individually or named in a group. Upon the demise of the testator, only the living beneficiaries named in a group are considered or those born within nine months of death.
Executor - This is the person named in the will and appointed by a probate court upon the death of the will-maker to carry out the wishes of the testator.
Custodian - This is the person named in the will who manages property inherited by a minor.
Witness - This is the person who watched the testator sign the will. They may be called by the probate court to testify in case someone disputes the will. You need two witnesses.
Administrator - This is the person appointed to distribute an estate if someone dies without a will or their will is invalidated. An administrator may also come in if an executor is unable or unwilling to act.
Asset - An item that is inherently valuable owned by the testator and makes part of the inheritance. It can either be used to pay any debt or be distributed among the beneficiaries.
Testate - Dying having made a will.
Intestate - Dying having no will.
Codicil - This is a document that amends an existing will and contains additional info.
Trust - The transfer of assets formally to a small group of people or a Trust company to manage them on behalf of the beneficiaries to a will.
Trustor/Settlor - The person who establishes a trust.
Trustee - This is the person who administers a trust on behalf of the beneficiaries.
Bequeath - To give one's property upon death.
Bequest - This is a gift of personal property other than real estate made upon death.
Estate Tax - This is the tax imposed by the federal government when large transfers of property are made through a will—also referred to as inheritance tax in some jurisdictions.
Inheritance Tax - This is a tax imposed by a few states in the U.S. The execution may differ from state to state. Some states exempt close family members from paying it.
Legal Requirements of a Will
There are five broad areas that are investigated to establish the legality of a will. It is important to note that the will only becomes legally enforceable upon the death of the testator.
Testamentary Intent
This simply means that the will-maker intended the document to be a will at the time the document was written. That's why most wills will commence with a line similar to 'I do hereby declare that this is my last will and testament...”
Testamentary Capacity
The will-maker must have the ability to create a will. The following conditions should be met:
- Must be of legal age
- Must be of sound mind
- Signature and date
For a will to be legally valid, it must contain a signature and a date. What constitutes a signature is liberally interpreted by the law. But it is good practice to use your usual signature. The signature must be at the end of the document. Anything coming after the signature is considered void.
Attestation
There must be at least two witnesses who must observe you signing the will. These two should also append their signatures and the date. Witnesses MUST not be beneficiaries of the estate.
Absence of fraud
Any fraud, undue influence, or underhand tactics will invalidate the will.
To recap on the legal requirements, for a will to pass the validity test in a court of law, the testator must be at least 18 years at the time of making the will and they must be of sound mind. They also should select an executor and beneficiaries and explain how their assets should be distributed. Lastly, they must sign and date the will in the presence of at least two witnesses who must also append their signatures.
There might be other legal requirements, but these are the basics that a court of law will subject your will to establish its validity.
Why You Should Have a Will
- You have some control over the distribution of your assets, even in death. You get to decide who gets what.
- You identify who to take care of your children, any dependents, and your pets.
- You minimize the tax liability due on your estate.
- You can decide to give a donation to a charity.
- To avoid the lengthy probate process if you die intestate.
- To prevent conflicts among family members over the distribution of your assets
Types of wills
There are several different types of wills that people come up with. Read on to decide which suits your circumstances.
Simple wills
The vast majority will fall into this category. They do not contain any complicated stipulations. They just state the bare minimum that a will should contain. These are the testator, executors, beneficiaries, and assets and how they should be distributed. For most people, this type of will is sufficient enough. They simply state the wishes of the testator in regard to the distribution of his assets to the beneficiaries. The will may also state who gets to keep some sentimental items. A donation to a charity can also be included in this type of will.
Testamentary Trusts
Also called Will Trusts or Trust Under a Will. These are a type of a will that create a trust within the will. The trust is established once the testator dies. The assets of the deceased go to the trust where a person known as a trustee manages them. This process goes through probate since the testator will have died. This type of will is used by people whose beneficiaries are minors or disabled or lack adequate capacity to manage their financial affairs. The will-maker would also wish the recipient gets the assets upon attaining a certain age, such as 25 or after finishing college. The trustee runs the affairs of the trust in the meantime.
Living Will
Living Wills do not detail how the assets of a deceased will be distributed. The purpose of a living will is to state the medical wishes a person would like in a lifesaving type of situation or end-of-life care. A living will states whether the person named would wish for medical interventions such as resuscitation, ventilator, feeding tube, or life support machines. It serves the same purpose as a medical Power of Attorney.
Living Trust
A living trust is not technically a will, but it is important to understand what it is in this context. It is an arrangement where one transfers their assets while still alive. A living trust transfers ownership of part of your assets from you to the trust. The living will also state how these assets will be distributed once you pass away. There are revocable trusts and irrevocable trusts.
Joint Wills
A joint will is a type of will used by spouses where one of them leaves their property to the surviving spouse who will then leave the joint properties to their common beneficiaries. A joint will is similar to a simple will only that it is made by two people and once one of them dies, the will cannot be revoked.
Mirror Will
Mirror wills are prepared by two people, whether married or in a partnership, with similar wishes in regards to the distribution of their assets and have similar beneficiaries. An aspect that differentiates them from joint wills is that they are two separate wills just mirroring each other. This difference makes them more flexible than joint wills. Estate planners advise couples to go with mirror wills rather than joint wills. It is possible to include individual requests in a mirror will or change it later.
Holographic Wills
The name sounds very scientific, but it simply means a handwritten will. This type of will is not valid in all states. They are normally drawn by people facing an imminent danger of death.
Creating a Will
There are three ways you can go about creating a will. You can do it yourself, use an online template, or have a professional do it for you. However, we acknowledge that some of you may not possess the necessary means to create a will using a template or paying a professional. In this case, it is best to check whether your location permits holographic wills. This can save you a lot of time, money, and effort, especially if you do not have complex wishes for the division of the estate that you leave behind. Check out this short tutorial for creating a valid will in four minutes by Estate Planning Attorney Paul Rabalais.
Do it yourself
You can prepare a will yourself without involving an attorney or any other professional. Provided you follow your state's legal requirements, your Will will be valid. People who don't have complex financial affairs and whose relationship with intended beneficiaries is straightforward can create a will by themselves. Be sure to check out the legal requirements specific to your state. Most states will require that the document purporting to be a will clearly state that it is a will, the testator to be at least 18 years, and be of sound mind. The will should fully identify the testator and the beneficiaries. It should clearly state and identify the assets to be distributed. An executor should be named and a legal guardian in the case of beneficiaries who are minors. Finally, the will should be signed and dated by the testator in the presence of two witnesses. These are the basic legal requirements that will ensure your will remains valid.
Online templates
This is the most popular option. It helps you avoid the hassle of identifying your state's legal requirements and also helps you with the structure and language of the will. Most online templates use language whose legal meaning is widely accepted, thus eliminating any loophole that may be exploited to mount a legal challenge to the will. This type of will is generally very effective and suits people who have a property or two and some assets they want to pass down to their beneficiaries.
Professional legal advice
Professional advice from an attorney is the most desirable step to take when creating a will for people who may fall into the categories below:
- Those whose assets and properties are significant and extensively distributed across multiple jurisdictions
- Those who co-own multiple assets with different business partners
- Those whose tax situation is not clear
- Those who anticipate challenges to their will due to relationships with the beneficiaries
- Those who are in a blended family (families with parents who are bringing in children from previous relationships)
- Those in families where minors or disabled dependents are involved
An attorney will help you draft a will that takes care of your personal situation in the best way possible. The downside is that a good attorney is not affordable for some. Still, the cost of an attorney’s service is nothing considering what is at stake and the chaos and expense that may be involved in the absence of a strong will.
Self-Proving Affidavit
Executive a Self-Proving Affidavit is an effective way to safeguard the validity of your will from a challenge. This affidavit is signed in the presence of a notary public and certifies that your will has fully complied with state requirements for validity. You can find a template for a self-proving affidavit here.
Updating/Changing Your Will
Updating or completely changing your will is possible and, in fact, highly advised in some instances, which we shall look at. You need to state clearly in the opening lines of your new will that you are revoking any other will that may exist before the new one. For minor updates, a codicil, which is an addition to your will, may suffice. However, any change or a new will requires two witnesses.
Let us look at the circumstances which necessitate updating your will:
- Change in marital status
- Changes in the composition of your assets
- Changes in the value of your assets
- Birth/death/adoption of new children or beneficiaries
- Changes in relationship with beneficiaries
- Changing your state of residency
- Any reason necessitating a change of executor, trustee, or legal guardian
- Any change in inheritance, probate, estate laws affecting your current will
Executor
The executor is a very important person in the will. They are the legal representative of the estate upon the will maker's death. They play an essential role in ensuring that all the wishes of the deceased are respected. As such, we have included a comprehensive section on choosing your executor in this guide. This will enable you to go through a simple question and answer activity. At the end of the activity, you should be able to narrow down your ideal executor.
Choosing Your Executor
It thus goes without saying that the executor should be someone who is honest and capable of administering the estate. More importantly, they should be willing to play this role. To begin the activity, list down any number of people whom you trust and whom you are certain to be willing to take on executing your will. Anywhere from three to ten people would be ideal. You can use this downloadable spreadsheet itself if you want to do this activity but a pen and paper will suffice.
The testator nominates an executor upon asking them to accept the role in the will. After the death of the testator, the executor applies for a grant of probate from whence they are legally granted the powers to act as an executor if there is no legal challenge to the validity of the will.
A beneficiary, such as a spouse or an adult offspring, can be an executor. For vast estates that may have complicated financial dealings, an attorney or financial expert may be better suited. It is important to note however that it is normal for an executor to hire professionals who are better equipped to handle the tasks involved in executing the will. Lawyers may be hired to apply for a probate grant and accountants may be hired to help comply with estate tax requirements. It is also perfectly normal for a will to have more than one executor.
Duties of an executor
- Locating the will
- Advising beneficiaries on the contents of the will
- Gathering the assets of the testator
- Probating the will
- Providing the beneficiaries any support they need
- Settling the liabilities of the deceased including debts and taxes
- Collecting any income due to the estate
- Distributing assets of the deceased to the beneficiaries
- Filing a report of the process
- Closing the estate
Choosing who to be a Witness to your Will
A witness is one of the most important parts of a will. Many wills are invalidated due to not meeting the legal requirements of who can and cannot be a witness to a will.
It is important to note that a beneficiary cannot be a witness. This is to avoid conflict of interest and possible undue influence on the willmaker. Some states may allow witnesses to be beneficiaries, but in that case, there must be at least one witness who is disinterested.
In many states, the witnesses must be at least 18 years old. Texas allows witnesses who are at least 14 years old.
In some states, the executor can also be a witness; in others, this practice is banned.
For wills prepared by attorneys, the attorney is a good witness. They may also find another person to act as a witness from their office, who is a perfect candidate since they are disinterested.
Role of the Witness
The primary role of a witness is to observe the testator signing the will. They do not have to know the contents of the document. They just need to witness the signature and append their signatures as well as the date.
The witness’s role is to testify, in case the will is challenged, that the testator signed the will in their presence. They need to testify that the testator appeared to be of sound mind and was aware that the document was meant to be a will.
They must identify the document they signed to be the one being contested.
They should also confirm the date and place of the signing.
People who can't be witnesses to a will
To avoid your will from being exposed to a legal challenge, it is best to find witnesses outside the following:
- Beneficiaries and their spouses or children
- Family members
- Spouse/partners in a civil union
- Minors under the age of 18
- Anyone who may not be of sound mind
- A blind or partially blind person
Where to Keep your Will
There are several appropriate places you can store your will. The key thing is to make sure it is safe, the executor and beneficiaries know of its existence, and they know how to access it when you die. If they don't know of the existence of a will or are unable to access it, your estate may be distributed according to the intestate laws, which may be very different from what you'd have wished.
Let's look at some common places where you can store your will.
With your Attorney
This is a common occurrence, especially when your attorney helped you draft the will. Many attorney offices have safe boxes where they store important client documents. If you decide to go through this route, make sure the executor knows this, and at least some of the beneficiaries know that the will exists and where they can find it.
In a safe deposit box
Safe deposit boxes are ideal storage for important documents such as a will. Make sure that the safe deposit box can be accessed by the executor after your death.
In the probate court
Some states allow wills to be filed in the probate court. This is a very good option as the executor and beneficiaries will not struggle to track your will.
Keeping it at home
You may decide to keep the will at home. This is not a very safe option since anything can happen to the home and destroy the will. Unauthorized access to the will may lead to an unexpected outcome. If you decide to keep it at home, try keeping it in a safe place such as a fireproof cabinet. Also, let someone know where the will is to be found upon your death.
Keeping it with the executor
Since the executor must be a person whom you trust, letting them keep the original will is an available option. It is the role of the executor to file your will with the probate court. This saves time that would have been lost tracking the will.
Online storage
This is increasingly becoming a popular and viable storage option. For the probate courts that require the original copy of the will, online storage services can provide a copy of the original and direct the executor on how to access the original. Online storage is a safe way to keep your documents safe and private until you die.
Digital assets
Digital assets and accounts have become a big part of our lives. They are part and parcel of our possessions, and we would like to control who ends up with them. Some of them have great financial value, while others have sentimental value. Things like videos and photos stored online are part of your valued possessions. Digital wallets and income-generating assets such as websites should be included in your will among your other assets.
You may specifically request in your will to delete some of your accounts online, such as social media accounts, once you pass on. Don't make the mistake of including any passwords in your will as a will is a public record once it is registered in the probate court. However, you can instruct your beneficiaries on how to access the passwords.
Your Small Business & Your Will
As discussed above, one of the most crucial reasons why you should set up a will is because it enables you to control the distribution of your assets, including your small business.
As such, incorporating your business into your will means that you can:
- Decide who gets your share/sole ownership of the business or any money that comes from selling shares.
- Improve upon your succession plan, knowing your business will be left in good hands.
- Reduce the chances of your business needing to close in the wake of your death so that those you love are still supported financially.
- Ensure that your finances are well managed and that new owners can apply for the appropriate tax relief.
- Allow you to make decisions on how the business ought to be run in the future, advising on tasks such as bookkeeping and tax planning.
Of course, your wishes for your business in your will may change depending upon whether or not you have sole ownership of the business, or are working as part of a larger partnership.
Wills for Sole Business Owners
As a sole business owner, if you do not have a will in place, you have no control over who gains ownership (or shares) in your business. The rules regarding asset division vary state by state, but often assets are handed out to spouses, children, or other close relatives if no guidance is provided by the deceased ahead of time.
This is a less than ideal scenario, especially if it is granted to a person with little to no business acumen, understanding of your brand, or even a desire to run a company in the first place. This could put the business you worked so hard to build on the path to closure. It could also place great financial strain on the beneficiary if they are not equipped to deal with businesses and all things finances, which could cause them to rack up debt.
If you have a person in mind whom you would like to inherit your business, you should have a conversation with them about what this means, to determine whether or not they are willing to take on this responsibility.
For example, you should take them through the different duties that will be expected from them, such as bookkeeping. This is particularly important when you consider the fact that poor bookkeeping and cash flow is the key reason why so many small businesses fail. However, there is also the option of outsourcing these duties - and these kinds of wishes can also be conveyed in your will if necessary.
The more detailed discussion you have with those around you regarding succession planning, the easier it will be for your business to carry on without you at the helm, and the more supported they will feel as they begin to shoulder this responsibility.
As a result, it’s important that you have a clear succession plan in place for your business and that this is factored into your will accordingly. The sooner you put this plan in place, the better (as is the general consensus for curating a will), as this means that protective measures are already established before any difficulties can arise.
Wills for those in Business Partnerships
If you run your business alongside numerous other partners, you may want your shares in the company to be dispersed among them or handed over to a family member.
When a business partner dies, other shareholders may want to:
- Work with the inheritor of your shares (spouse, child, colleague, etc.)
- Sell their percentage of the business to the new inheritor, or buy them out
- Liquidate, sell or close the business
Having a conversation ahead of time ensures that everyone is on the same page, and this information can then be built into your will to ensure that everything goes to plan. This should give you much greater peace of mind moving forward.
Various studies have found that the death of a business founder or owner can have a catastrophic impact on the business. For example, one report detailed how, on average, a "founding entrepreneur's death wipes out 60% of a firm’s sales and cuts jobs by roughly 17%."
This alone speaks to the need to communicate with business partners and putting together a succession plan that not only discusses the handover of your business, but also anything relating to finances and accounting.
Drafting a Will with an Accountant
You may find it useful to work alongside an accountant when drafting this section of your will. This is because they will have a deeper understanding of your small business accounting setup, and will help you to find a way to minimize the financial strain that death can cause on a business.
For example, when it comes to tax preparation, they can ensure your business partners or the new owner receives the appropriate tax deductions or support moving forward. More generally, they can also assist with other aspects of outsourced bookkeeping, such as setting up up QuickBooks software to use to better manage your finances.
Either way, the better condition your finances are in, the better your business will perform - even when you are no longer around. While this can be daunting or upsetting to think about, laying the groundwork now will give you greater peace of mind as you’ll know that your legacy, and hard work, will continue moving forward.
It also means that the new owner of your business, or any business partners, are protected from the stress that could incur if you do not have a will in place.
Accountants can work in collaboration with you to create ‘DIY’ will, or you can collaborate with a legal professional. The latter is often advised due to the fact that they are more aware of the legalities at play and can streamline the process for everyone involved to make it as easy as possible to set up your will and testament. Once again, this can provide you with greater peace of mind.
Bottomline
A well-written and valid will is the best gift you could ever leave your loved ones. It saves them a lot of stress that is associated with dying intestate. It also lets them know your wishes in regard to the distribution of your assets and other sentimental belongings. You could also direct that a portion of your assets go to a charity close to your heart which your loved ones will only be glad to do.