Wills: An Overview
A will is a document written by someone, referred to as the testator (a female is sometimes known as the testatrix), that details what property he owns and to whom it should be distributed after his death. It may also specify who should not receive anything. A testator can always revoke the will, but once he dies, then the will becomes irrevocable, since only the testator can revoke his will.
Without a will, property is distributed per the intestate rules of the state in which the decedent was domiciled. Any real estate property located in other states are usually distributed per the intestate laws of that state. Under intestacy, property is usually distributed to close relatives, especially a spouse and children. A will would be needed to distribute property to friends or charities or to disinherit close relatives. However, most states provide that a minimum amount of property must pass to the surviving spouse or children, what is known as the elective share. In community property states, each spouse owns 50% of all community property, so when one spouse dies, only 50% of the property can be distributed by the will of that spouse. In the absence of a will, all the community property goes to the surviving spouse, even if there are children in the family.
To be valid, a will must conform to the applicable state law, sometimes referred to as the will acts formalities. Thus, to conform to legal requirements and to be practicable, wills have common provisions. The introductory clause of the will should state the testator's full name; establish the domicile, which is the county and state that will have legal jurisdiction in determining the validity of the will and interpreting will provisions; and to revoke all prior wills, to nullify wills or codicils that have not been properly destroyed. Although mentioning the domicile will not be dispositive when the evidence indicates that another domicile is the actual domicile, it may be helpful in cases where there may be a question of the true domicile, especially if the testator lived in more than one state over the course of the year.
The will should also conform to other dispositive instruments, such as trusts, life insurance and other types of contract designations, buy sell agreements, and any employee benefit plans. Charities should be designated by the full name as listed in the Exempt Organizations Select Check published by the IRS.
A will should also name one or more executors of the estate, who would carry out the wishes of the testator. If it executor is not named or the named executor cannot serve for any reason, then the probate court will appoint an administrator for the estate. Executors are also referred to as personal representatives, which is a more generic term to describe either the executor or an administrator appointed by the court. It is better to list 2nd or 3rd choices for executor also, in case the 1st choice either does not want to serve or the executor dies before the testator. People with large estates should also appoint a professional personal representative, it would be more familiar with the rules of probate, which is the procedure that the courts follow in determining the validity of the will, how the property should be distributed, and how that distribution should be accounted for. (Testatrix, executrix, and administratrix are sometimes used to denote a female for these positions, but these terms are falling out of use. Testator, executor, and administrator are used for either male or female.)
The powers clause gives the executor or the trustee:
- specific powers and authority to administer the estate or trust that will not depend on state law;
- limits the power of authority in some cases;
- provides authority to continue a business or manage other property with special management or investment requirements;
- protects the executor against suit by beneficiaries by listing the powers needed to administer the estate.
In most states, the executor is required to post a bond, unless the testator leaves an instruction in the will to forgo that requirement, which is usually done when the executor is a close family member, and who may even take under the will.
A will can also establish a testamentary trust to distribute the property over an extended time, in which case the will should also appoint the trustee to manage the trust. However, most trusts are usually established during the lifetime of the property owner so that trust property avoids probate. Obviously, a testamentary trust does not avoid probate, since it is only formed after the will is probated. The testamentary trust is so-called because it was formed by the decedent's last will and testament. Forming a trust to distribute property over an extended time allows the assets to be professionally managed and to be distributed as to the needs of the beneficiaries or depending on their level maturity. Even if a trust is set up before the decedent died, there should be a pour-over will that will allow any assets that were not transferred to the trust before the death of the decedent to be placed there.
Property must also be managed for minor children, since they are not permitted to own property. In many cases a guardian must be named to take care of each child and there may be a separate property guardian to manage the property for the children until they reach the age of majority or even later if the property is held by a trust. If the will does not name a guardian for the children, then the court will appoint one. When making bequests to the issue (descendants) of the testator, the testator should specifically include any adopted children, since they are not considered issue of the testator.
The common disaster clause stipulates that where both spouses die simultaneously in an accident or other mishap, the beneficiary is presumed to survive the testator. This provision is necessary because many state laws stipulate that the testator survives the beneficiary, so the marital deduction may not be applicable.
The will should state that only legally enforceable debts be paid. If the will does not provide otherwise, some states require that specific bequests that have associated debt on the property, such as real estate, be paid off before the property is transferred, but in other states, the beneficiary receives the property with the debt.
Many types of property may also pass outside of the will, either by contract or by a form of joint ownership. Many assets that are passed by contract include retirement accounts, life insurance proceeds, annuities, and other such assets. Property held under joint tenancy or tenancy by the entirety will usually pass by right of survivorship to the remaining joint tenants.
If children are not mentioned in the will, then the laws of most states treat them as pretermitted heirs that will allow them to take a share of the estate regardless of the provisions in the will, unless the will specifically excludes them. Pretermitted heirs also include children that were born after the will execution or children who were not known when the will was executed.
A will could also be constructed to minimize estate taxes, if the estate is large enough that they would apply, and to decide who is to bear most of the costs associated with the estate, i.e., who will pay for the decedent's final expenses and the administration of the estate. In most cases, the beneficiaries of the residue of the estate, who usually obtain most of the property, pay most or all these liabilities. Otherwise, if it is not specified in the will how such costs should be apportioned, then most states will apportion the costs among beneficiaries in proportion to what they take under the will.
It is common to stipulate how taxes will be paid. Because the residuary estate is usually the largest, taxes are usually paid from that. A provision can also be added to have all taxes paid on all estate property, including nonprobate property. This will lessen the gift for those people receiving the residue of the estate, so that should be considered. If the apportionment of taxes is not provided, then most states require that all beneficiaries pay a portion of the tax in proportion to their gift.
If an item is covered by insurance and is lost or stolen, then the will should stipulate that the insurance proceeds should go to the beneficiary that was to receive the property, although in some states, insurance proceeds automatically pass to the beneficiary of the insured property.
There are several legal requirements for a qualified will. Testators must be a minimum age, which is most states is 18, and must be of sound mind to make a will. The required mental capacity to make a will is less than that required for signing contracts. The testator must know the extent and value of his property and who his family members are, which is often referred to as the natural objects of his bounty.
Most states require at least 2 witnesses to attest to the signing of the will by the testator, and some states require 3. Pennsylvania is the only state that does not require any witnesses. Although most states require at least 2 witnesses, it would be prudent to have 3 witnesses, to comply with the laws of any state, should the testator move before his death. Additionally, there will be more people to testify in the case that one or more witnesses dies or are otherwise not available to testify because they moved to another location, and so on.
The will must be signed and dated by the testator. About half the states recognize a handwritten well, which is often referred to as a holographic will. However, some states may require the entire will to be handwritten: any printed material mixed in may invalidate the will. Less than half the states recognize oral wells, often referred to as nuncupative wills, where the testator dictates the terms of the will, but only under certain extraordinary circumstances, such as during a terminal illness or a mortal wound from combat, and only if there are enough witnesses to testify as to the content of the will. However, the nuncupative will must be written within a statutory period, usually 30 days.
To avoid litigation, the will should also stipulate that all prior wills are revoked; otherwise, the will may be treated as a codicil, which is a will that changes the provision of one or more provisions of a previous well.
Note that a will cannot change the terms of a trust or the disposition of property held by the trust, unless the will provides that the trust can be amended or that one or more of the beneficiaries has the power of appointment, which will allow them to name other beneficiaries to receive the property.
Probate fees depends on state law, but they can be as high as 5% of the estate value. Additional fees may also be awarded by the court for specific types of services, such as preparing tax returns or selling property, or fighting will contests. A will can be contested for the following reasons:
- the testator lacked sufficient mental capacity or was unduly influenced by others when the will was executed;
- the will submitted to probate court was revoked;
- The execution of the will does not conform to statutory formalities; or
- the will was forgery.