Details on Wills

A will is a legal document. It identifies the beneficiaries who will receive your assets, and it names who will oversee the distribution of your assets upon your death (the executor of your estate). It also names a guardian for your minor children or a disabled adult in your family. Upon your death, your executor will bring your will to probate court to begin the processes of proving the document is valid and distributing your assets.

A will is a matter of public record. Because probate is a fair process, it gives confidence that the heirs will receive legal title to their inherited property, eliminating future questions of ownership. Anyone with a financial interest who believes they did not receive their fair share can dispute the will.

Meeting With an Attorney

Prepare for your meeting with your attorney by talking with your family. Make your wishes clear so that the courts and family members don't make decisions for you. Invite your financial planner or other trusted adviser if you anticipate family conflict. Including your family in the process ensures the estate documents are written in a way that meets your objectives and avoids family disputes. This is especially important for unmarried couples and those with child custody decisions.

Create a list of your assets and liabilities, with current value and title of ownership for each. The way a property is owned - in your name only, jointly or with a named beneficiary - affects distribution. Include ownership and beneficiaries for annuities and insurance policies.

A successful estate plan will make sure your assets are titled properly to meet your objectives. For example, you and your sister own a beach house together and ownership is titled "joint tenants with rights of survivorship." Your will clearly states you want to pass your share of the beach house to your son. Unfortunately, upon your death your sister will get your share of the beach house, and your son cannot contest the will. How did this happen?

An account titled "joint with rights of survivorship" or "tenants by entirety" will automatically pass to a surviving account holder. Contracts with named beneficiaries, such as retirement plans, trusts and life insurance products, avoid probate court. So do "transfer on death" accounts and government savings bonds. In all of these cases, the funds are distributed outside of the will. Property that passes to a beneficiary by contract or title supersedes any instructions stated in the will.

By retitling the ownership of the house to "tenants in common," your share of the property would be distributed according to the provisions in your will, and upon your death your son and your sister would be the owners of the summer house.

If you are the parent of a minor child, you will have the important decision of naming who will be the guardian for your children and who will be responsible for managing their assets. Don't leave assets directly to a minor beneficiary. Because a minor is not legally qualified to receive the property, the family may have to petition the court to name a guardian for the assets until the minor is legally an adult. This can be a costly and lengthy process. If your child has special needs, a special needs trust may be required to hold the proceeds of the inheritance.

Other Issues

In addition to your will, your attorney should prepare three other critical documents: a durable power of attorney, a healthcare proxy and a living will. The durable power of attorney authorizes a representative to make decisions on your behalf if you are incapacitated and unable to do so. The powers listed in the document can be broad or limited. The healthcare proxy authorizes a person to make medical decisions on your behalf, in consort with wishes stated in your living will. Have a conversation with the person you authorize to act on your behalf to make sure your wishes are completely understood.

Review your will every few years, whenever a life-changing event occurs. Also review your will if a substantial change in tax laws or your net worth occurs.

Your entire estate, including probate and nonprobate assets, is subject to estate tax. Due to the expiration of federal estate tax law, 2010 marks the first time since 1916 that the United States does not have an estate tax! This is good time to review your finances and your estate plan to make sure any tax-law changes do not affect the distribution of your assets.

Estate Planning

Draft a will; consult an attorney to ensure it is legally sound.

Title assets appropriately to meet distribution wishes.

Draft a durable power of attorney, healthcare proxy and living will.