Estate Planning Checklist
Estate planning is the effective accumulation, conservation, and distribution of assets pursuant to the testator's wishes. Common problems with estate planning include: no will; lack of liquidity to pay administrative costs, taxes, and other expenses, which may cause a forced sale of assets below their intrinsic worth; improper disposition of assets, where a beneficiary may get the wrong property or the beneficiary may receive the property at an immature age. Liquidity is needed to pay federal and state estate taxes, income taxes on pension distributions, probate and administrative costs, payment of outstanding debts, and to pay specific cash bequests, provide family support, and to pay possible generation-skipping transfer taxes, and funds required to continue the operation of a family business.
This article lists some of the things that you should consider when contemplating the execution of your will, to give you an idea of what information you need to gather and to start thinking about how you want your property distributed after you die. This article is not intended to be all-inclusive, but to just give you a better idea of what needs to be done and the basics of writing a will.
Estate planning goals include:
- leaving property to your beneficiaries,
- providing for young children and disabled adults,
- planning for incapacity,
- avoiding probate, and
- reducing estate tax.
If you die intestate, your property will be distributed to your legal heirs; otherwise your property will be distributed to your beneficiaries that you designate in your will. In either case, your estate will have to be administered by someone—if you die intestate, then the court will appoint an administrator to manage your estate. If you have a will, then you can appoint a personal representative, also known as an executor, to manage your estate. In either case, it would be helpful to have pertinent information that will allow the personal representative — either the court administrator or the executor — to distribute your property, pay your debts and taxes, and to close your estate. Obviously, your personal representative will have an easier job if you provide her with the necessary information, which should include the following:
- names, addresses, and birth dates of:
- a list of disabilities or special needs that your beneficiaries may have;
- the sources and amount of your income, including interest and dividends;
- household income, including spouse's salary or income and children if they live with you;
- amounts and sources of all your debts including mortgages and some monthly leases and business debts;
- your property:
- the amounts and sources of any retirement benefits, including IRAs, pensions, Keogh plan accounts, and profit-sharing plans;
- amounts and sources, with account numbers of other financial assets including bank accounts, annuities, outstanding loans, etc.;
- life insurance policies, including account balances, company names and addresses, policy owners and beneficiaries, and any amounts borrowed against policies.
- a list of valuable property and their worth, especially real estate, jewelry, furniture, heirlooms, and other assets, and list of names the people that you want to leave each item to.
- a list of property located in other states
- the co-owners of any property, and their addresses and phone numbers or other contact information.
- usernames and passwords to access to all of your information stored in computers, and usernames and passwords to each online account, including all billing accounts, since your executor will have to pay these bills and close the accounts.
- a list of important documents and their location that might affect your estate plan, including prenuptial agreements, marriage certificates, divorce decrees, recent tax returns, existing wills and trusts, property deeds, etc.;
You should notify someone or several people where this information can be found.
When choosing a personal representative, consider that the personal representative must be able to collect all the assets, pay all obligations, then distribute the assets to the beneficiaries. This may be simple for small estates, but, depending on the property to be transferred, may be more complex and time-consuming. The personal representative should not have any conflict of interest in managing the estate. The personal representative must have the time and inclination to manage the estate process, which may take months or longer. The personal representative should both know the family members and get along with them well to avoid problems. The personal representative may also be required to live in the same state as the testator unless he is a close family member.
Wills — A Quick Overview
A will may not be hard to write—especially if your estate is small and your estate plan is simple then you could probably write your own will, without too much difficulty, especially if you use books or software that take you through the will creation step-by-step. Many of the legal perils in the past were artificial, created by a legal system that served to enrich lawyers at the expense of other people's estates. However, the modern trend has been to give paramount significance to the testator's intent rather than to thwart the testator's intent because of harmless errors; hence, if you are clear in your intentions, both in your will and to your family members, then your will should be carried out largely in accordance with your wishes, especially if you are giving most of your property to your family members.
If you live in a state that provides a statutory will, then you can probably use that if your estate is simple. The statutory will is a free will created by state law, and is available in California, Maine, Michigan, and Wisconsin. The testator only needs to fill out the will and have it witnessed, dated, and signed.
The most significant legal requirements for a will include:
- you must have reached the age of majority, which in most states is 18.
- at the bottom of the will:
- write the date the will was executed so that if there is more than one will, your personal representative will probate only the last will.
- sign the will
In almost all states, to execute your will, you generally must have 2 witnesses actually see you sign your will and know that you are signing your will and you, in turn, must see them sign their signatures as witnesses. Even if some states, such as Pennsylvania, do not require witnesses, it would be prudent to use them anyway, since they may help to prevent will challenges.
You may also want to attach a self-proving affidavit that is notarized to create what is called a self-proving will, which eliminates the need to have your witnesses testify as to their signatures when the will is probated, since they may not survive you.
Wills should be at least reviewed for possible updates:
- at the birth, adoption, or death of a child;
- marriage, divorce, or separation of any beneficiaries;
- when the testator moves to a new state;
- changes in income or wealth of either the testator or the beneficiaries;
- changes in the needs or objectives of either the testator or the beneficiaries; and
- major changes in tax law, especially regarding estates.
Writing Your Will
When writing your will:
- care should be taken to avoid ambiguity;
- avoid precatory language, which is expressing a wish, since wishes have no legal effect.
- although funeral directions can be listed in your will, your will may not be read until after your funeral, which would render such directions moot.
- remember that your estate is liable for your debts, which will reduce the amount that you can give to your beneficiaries. Debts generally have following descending priority:
- funeral expenses,
- administrative expenses,
- family allowances,
- last illness expenses,
- all other debts.
- In your will, you should name your executor and your successor executor, in case your 1st choice does not want to serve or cannot serve for whatever reason. You may also want to list specific powers for your executor, such as:
- being able to buy, lease, sell, and mortgage real estate;
- be able to borrow and lend money;
- to consider various tax options and to act to lessen those taxes, or you can refer to a statutory list provided by state law or to Part 7, Duties And Powers Of Personal Representatives, of the Uniform Probate Code.
- If you own and operate a business, you must give your executor the power to continue the business or enter into new business arrangements; otherwise the business may be liquidated or sold.
- You want to authorize your executors to pay enforceable unsecured debts— specifying unsecured debts allows the executor to pay off debts without having to pay off a large debt such as mortgage or a loan for a motor vehicle. Specify enforceable so that creditors with unenforceable claims are not paid.
- You may want to specify that your executor does not have to post a bond, especially if your executor is a family member; otherwise the probate court may require your executor to post a bond.
- When writing a will, you must 1st state your testamentary intent, such as "This is my will." You may also want to state that any prior wills or codicils are revoked.
- Itemize your personal property and designate your beneficiaries for each item and name contingent beneficiaries in case your beneficiaries predecease you, or disclaim the gift.
- For stuff like furniture, use categories instead of specific items. Use a general description if the specific item may change before you die, such as my personal car rather than my 2008 Toyota Camry.
- For money and other intangible assets, you should specify a portion to each beneficiary, such as "to each of my children, in equal portions." This will cover children born or adopted after your will is executed, for instance.
- A will should always have a residuary clause, otherwise property that is not mentioned in the will falls to intestacy. Assets that belong to the residuary constitute the residuary estate. Because the residuary estate usually receives the bulk of the property, it is generally used to pay all expenses and debts, so be sure to stipulate that all debts and expenses are to be paid from the residue of the estate; otherwise all gifts, including specific gifts, will be abated to pay the expenses, debts, and taxes of the estate.
- Simultaneous Death Clause. Specify that a beneficiary must survive by a minimum amount of time after your death, such as 30 days or 5 days, since you probably want your gift to go to your contingent beneficiary rather your beneficiary's beneficiary.
- Minor children will need a guardian for their care, so you must specify who will be the guardian of your children if both you and your spouse die. Since minors cannot own property, you must transfer any gifts to minors to their guardian, to their property guardian, or to a custodian under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act.
- Let close family members know where you are keeping your will so that they can locate it after your death.
- Most attorneys will safeguard your will at their office if they also drafted it.
- Many states allow you to file your will at the probate court.
- Keeping a will in a safe deposit box is sometimes a bad idea since some states prevent the safe deposit box from being opened until after probate has begun. It is best to give your executor the information about the location of the safe deposit box and the key to open it, so that he can open it without obtaining permission from the probate court. Naturally, you want to do this with someone you trust.
- You can also store copies of your will in various locations for your reference. However, a copy cannot serve as a will unless it was executed with the Will Act formalities.
- You may also want to have duplicate originals so if one gets lost or destroyed you have the other. Duplicate originals are copies of your will that are independently signed and witnessed, and, hence, any of the duplicate originals can be probated as your will.