What You Should Know About Wills

APPOINTING AN EXECUTOR

You should appoint an executor in your will. An executor locates heirs, lists property, pays debts, and distributes property to your heirs. A relative or friend can serve as your executor, but you should consider using a professional executor (such as a bank or trust company) if you have a large or complicated estate. An executor should be someone who is familiar with managing property, financial matters, and record-keeping. Before naming an executor, confirm that the person is willing to serve. Your lawyers can help you select the best executor. As noted above, your will can state that the executor is not required to furnish a bond, thus saving your estate this expense.

APPOINTING A GUARDIAN

If you have children under 18, you should appoint a guardian in your will. Otherwise, if you and your spouse die at the same time without such an appointment, a court will select a guardian to care for your children and manage their inheritance until they become adults. You can create a trust to control the property transferred to your children. A trust is useful if you are concerned that the children may lack the maturity to handle their inheritance after age 18. Your lawyer can help you to select a guardian and create a trust in your will that protects your children and your wishes.

KEEPING YOUR WILL IN A SAFE PLACE

Your will should be kept in a safe place so that it can be promptly located when you die. You may wish to have your lawyer keep the original to protect it from damage or loss. Although you are not required to give your executor a copy of the will, you should tell both your executor and a trusted family member where your will is stored.

LIVING WILLS

In addition to ordinary wills that state your wishes for your property when you die, the laws of some states permit “living wills” that instruct your doctors to withhold life support equipment while you are alive. A living will is important if you become comatose with no hope of regaining consciousness. Your “living wills” should be written in a document separate from your ordinary will and you should re-sign and re-date it every few years to comply with your state law and to reaffirm your preferences. Give a copy of your “living will” to your doctors and to a close family member. Your lawyer can help you write a “living will” and advise you about re-signing it every few years to keep it valid.

MAKING YOUR FUNERAL ARRANGEMENTS

You can include instructions for your funeral arrangements in your will. However, you may wish to put these instructions in a separate letter. Give a copy of the instructions to your executor or a family member or friend to avoid delays when you die. You can also include instructions about gifts of your body organs to hospitals for research or transplants. Such instructions for gifts of body organs can be noted on your driver’s license or a separate donor card that you can carry in your wallet.

REDUCING THE TAXES ON YOUR ESTATE

Federal estate taxes and state inheritance taxes may be deducted from your property before it is transferred to your heirs. A federal estate tax applies if the value of your property exceeds an exempt amount that varies depending on the year of your death. Following is a table of the exempt amount:

Year of Death                          Exempt Amount
2002-2003                               $1.0 million
2004-2005                               $1.5 million
2006-2008                               $2.0 million
2009                                          $3.5 million
2010                                          No estate Tax
2011 and after, $1 million, unless Congress extends the repeal of estate taxes.

A special $1.3 million exclusion applies to estates that hold investments in family businesses and farms. Your lawyer can help you prepare an estate plan that will reduce federal and state taxes. For example, your lawyer may suggest that you make gifts before you die to reduce taxes, hold property in joint tenancy with your spouse, transfer ownership of life insurance policies to your spouse or heirs, or use a trust arrangement.  Your lawyer can also help you shift the tax responsibility among heirs if you would like some of them to receive their shares without being taxed on it.

REDUCING PROBATE COSTS

Probate costs include court fees, bond premiums and the fees of professionals who assist your executor with the administration of your estate. Your lawyer can help you reduce probate costs with estate planning tools like joint ownership, living trusts, lifetime gifts, and business recapitalizations. For example, your lawyer can prepare a living trust in which you appoint a trustee to distribute your property when you die. Some estate planning tools can help you reduce probate costs, but they may not lower your estate taxes.

PREPARING YOUR WILL WITH A LAWYER

Your lawyer can help you draft your will and explain the tax consequences. Your lawyer can also help you comply with the detailed requirements for a valid will, see that your property is distributed as you wish, and reduce estate taxes and probate costs. The legal fees are usually well spent and often less than the added costs and taxes that would result from dying without a will.

You should have a will if you own any property-a home, a car, bank accounts, stocks and bonds, retirement benefits, jewelry, clothing, household goods, and so on. A will lets you distribute your property as you want with a minimum of costs and taxes. It is an opportunity to select an executor for your estate, a guardian for your children, establish trusts and dispense with costly bonds. If you don’t have a will, ask your lawyer about drafting one without delay.

CHECK LIST FOR WILLS

(1) ESTATE PLANNING TOOLS

A. Will
B. Joint tenancy
C. Living trusts
D. Lifetime gifts
E. Business recapitalization

(2) SELECTING YOUR HEIRS

A. Spouse
B. Children
C. Parents
D. Other relatives
E. Friends
F. Charitable organizations

(3) IDENTIFYING YOUR DEBTS AND LIABILITIES

A. Credit cards
B. Loans
C. Home mortgages

(4) LISTING YOUR PROPERTY AND THE HEIRS TO RECEIVE IT

A. Automobiles and boats
B. Bank accounts
C. Computers and electronic equipment
D. Home and household goods
E. Insurance
F. Jewelry
G. Rental property
H. Stocks and bonds

(5) APPOINTING AN EXECUTOR FOR YOUR ESTATE
(6) NAMING A GUARDIAN FOR YOUR CHILDREN
(7) CREATING TRUSTS FOR ALL OR A PART OF YOUR PROPERTY
(8) ALLOCATING TAXES AMONG YOUR HEIRS
(9) PROVIDING FOR FORCED HEIRS
(10) DISINHERITING UNWANTED HEIRS
(11) COORDINATING WITH THE WILL OF YOUR SPOUSE
(12) DIRECTIVE TO DOCTORS TO WITHHOLD LIFE SUPPORT (“LIVING WILL”)

For additional information contact us today at edamaral@amarallaw.com or visit our new website, www.amarallaw.com.

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