If there's one thing that financial advisors agree on, it's the importance of having a will. It's the keystone in proper estate planning.
Dying intestate — without a will — may impose costs and delays on your loved ones. It can dynamite your estate plan unless you made other plans.
If you don't create a will, your state may keep some of your hard-earned assets and divvy up the rest in a way that will make you turn in your grave. All based on state rules for disposing of the assets of people who die without a properly written will.
Your state does not care what you had in mind. "If you die intestate, probate court rules will apply. Period," said Rob Williams, managing director of financial planning, retirement income and wealth management for Charles Schwab. "If you don't write a will, you're leaving it to your state to decide where your assets go."
Will: Key To Proper Estate Planning
With life expectancy falling in the U.S., the need for a will and estate planning is rising. Life expectancy fell to 76.6 years in 2021, according to Virginia Commonwealth University. That was due to deaths caused by the coronavirus. It was a decline from 76.99 years in 2020. In turn, that was down from 78.86 years in 2019.
And yet fewer than half — 46% — of U.S. adults have a will, according to the latest Gallup poll. That's around the same level it's been in other Gallup polls since 1990.
But, depending on how complex your situation is, you can either write a will on your own or at least get the process started by yourself. Especially if you end up paying a lawyer by the hour to finish the job, your head start will save you money.
There are numerous online resources that provide a checklist of points you ought to address. In some cases, they provide language required in your state.
Rich As Elon Musk
"You don't have to be superwealthy like Elon Musk to need a will," Williams said. Even people with modest, middle-income assets can save their loved ones considerable expense, time and aggravation by specifying how they want their assets distributed, Williams says.
In some states, a surviving spouse gets everything. In other states, your widow or widower might only get one-third. Some assets might go to your parents. What about your ex? "Plan ahead because you might really dislike some outcomes under probate rules," Williams said.
That can be especially important if you have minor children, Williams adds.
How To Write A Will
So what are some of the steps you can take on your own? What are the potentially surprising tips for creating a good will?
Beneficiary designations overrule a will. Whomever you listed as your beneficiary on brokerage, retirement and bank accounts generally gets your assets after you die. The designation outweighs beneficiary designations in a will, Williams says. If you list someone different in your will, decide which outcome you really want. And change whichever estate planning document needs to be updated.
Use a professional if you own property in more than one state. States may have conflicting rules. Consult a pro in each state, Williams says.
A will may not be enough. "Death isn't the only thing you need to plan for," Williams said. "Illness is another." So remember to create additional estate planning tools. A durable power of attorney will enable a person of your choosing to manage your finances if you become incapacitated. A health care proxy will empower someone to make medical choices if you're unable to speak for yourself. A living will puts your health care decisions into writing.
Is A DIY Will Worth Anything?
Do it yourself? If you want to avoid or minimize lawyers' bills, you can find free, state-specific will forms online. In most states, handwritten wills are also accepted, but only if they were witnessed properly.
Use valid witnesses. Generally, you need two adults to sign your will as witnesses. Check with state authorities (such as your secretary of state's office) to verify that "adult" means age 18 or older. And witnesses must be "disinterested." That means they must not be related to you by blood or marriage. They also must not be in line to inherit from your estate.
Don't name a pet as a beneficiary. Like it or not, a pet is property. That means it cannot inherit property. But don't worry. You can care for Muffy or Max's needs through other estate planning steps such as creating a trust.
Spell out who gets what. Dollar amounts are good for smaller gifts. But specify larger gifts in percentages. That gives your executor flexibility in case the size of your state is more or less than you expected. And everything from unexpected bills to taxes can affect the size of your estate. Also, don't overlook assets such as cars and your golf clubs.
List Debts In Your Will
List your debts. Simply to help your executor, devote a section of your will to listing debts you expect to leave behind and amounts you expect to owe. It's not binding. It just helps your executor organize your estate and deal with bills.
List key people. Name your executor and a backup executor in your will. Naturally, talk with them in advance to make sure they willing and able to take on those estate planning roles.
Talk with beneficiaries. Help loved ones avoid awkward surprises after your death by telling them in advance what you do — and don't — plan to leave to them.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
