What is... a Will?
This post is the first part of a series of blog posts we are launching that we call the "What is..." series. This blog series will explain common estate planning terms and instruments in concise, easy to understand posts.
A will is a document that tells the world what someone wants to happen to their money, their things, and who should care for their minor children when they die.
In a will, you can name specific people you want to receive specific items, like your favorite baseball or a piece of jewelry. You can also name whether you want anyone to get a certain amount of money. (The people you name are called beneficiaries.) You also should indicate what you want to be done with any remaining things or money (your assets) that are left over after you’ve specified what happens.
A will also allows you to designate a guardian for your minor children if you and the other parent die before any child turns 18 years of age.
In a will, you also nominate an executor. This person is responsible for carrying out the wishes listed in your will, paying any outstanding debts (think of the balance on your credit card bill!), taxes, or other cost.
The will does not cover things that have designated beneficiaries built in. For example, a life insurance policy or a retirement plan (401(k) or IRA) allows you to designate a beneficiary. The will does not change who you listed on those accounts.
So why can’t you just write your own will?
Legally, you can. California recognizes handwritten wills when certain conditions are met.
But here’s the problem: a will only goes into effect when a person dies. It only covers one scenario. For example, a will does not go into effect if a person is incapacitated. A person is incapacitated if he or she is in a coma, or suffers from dementia, or even while under anesthesia in surgery. Essentially, any time someone cannot make his or her own decisions, that person is considered to be incapacitated.
A will also requires that your estate go through probate court. Probate is a court proceeding, and like most court proceedings, it means that your will (including your assets listed in the will) becomes public. It means that your executor has to spend time and money to make sure that your bills and taxes are paid, and that your stuff gets where you want it to go. Probate costs money because there are fees associated with the process, like executor fees and attorneys fees. In California, there’s a statute that states how much money the executor and his or her lawyer can get in probate.
How can you make sure that you are covered if you’re incapacitated? How can you ensure that you avoid probate? The short answer is that creating a comprehensive estate plan built upon a living trust might be the answer.
To determine what kind of estate plan you and your family needs, please contact us for a free initial consultation at firstname.lastname@example.org.