Do you need a will? What to know about estate planning

Jim Ludwick, CFP®
Contributor

Do I need a will? How do I get one? The answer financial planners usually give is that it depends.

But generally speaking, you should have an up-to-date will, as well as a durable power of attorney for health care, also called a health care proxy, and an advance health care directive, also known as a living will, for estate-planning purposes.

Property transfer clarity

Tabloids are full of stories about the disastrous fallout when celebrities die without wills or other crucial documents in place. Elvis Presley might be the most famous example, but there are countless others, including Marlon Brando. Michael Jackson and now Prince. The drama surrounding celebrity families and their estates may be more sensational than what a typical individual would face, but I still wouldn’t want any of my clients’ families to be in a mess.

Having a will can make the transfer of assets a much less confusing and difficult task. A will tells the decedent’s executor or personal representative how his or her assets should be divided. A will can also indicate in what order heirs should receive these assets, in case funds run out before all bequests are fulfilled.

Your will can lay out your wishes for some of your belongings, but keep in mind that property generally moves to a new owner in one of three ways: by title, beneficiary or a judge via probate.

When that property is owned jointly — and there are two names on the title — it passes automatically to the surviving owner. Other financial assets, such as life insurance proceeds and funds from retirement plans, are automatically transferred to the named beneficiary or beneficiaries,  so make sure these are up-to-date. If neither of these situations applies and no will is presented to the appropriate court, judges finalize the transfer of property in probate according to a will or state law.

Why Estate Planning Matters for Everyone

In case of incapacity

To help clients understand the consequences of not having a living will, I almost always share the story of a young Florida woman named Terri Schiavo. Months after she’d suffered severe brain damage, Schiavo remained in a persistent vegetative state. Her husband wanted to remove the feeding tube keeping her alive, arguing that she wouldn’t have wanted to be on artificial life support. But her parents opposed the move, and she hadn’t left behind any estate-planning documents to indicate her wishes. The saga lasted almost a decade, and the courts, Congress and even President George W. Bush eventually became involved.

If you become incapacitated, two legal documents can help express your wishes. A living will — also called an advance health care directive —  describes how you want to be treated at the end of life, so that your appointed agent can make decisions in accordance with your wishes. In a durable power of attorney for health care, you name the person who’ll make those decisions on your behalf.

Where to get estate documents

With these stories in mind, you’ll quickly realize why it’s so crucial to have up-to-date estate-planning documents. You can get these legal documents from lawyers who specialize in estate planning. Estate and trust attorneys can help you transfer property to your heirs  in the most tax-efficient way possible and make sure your plans adhere to estate laws, which vary by state.

There are also online services that provide templates for wills, powers of attorney and health care directives. I’m frequently asked if people should use such websites. Again, it depends. However, throughout my career, I’ve seen that it’s safer to have an experienced estate and trust attorney who understands your family’s specific circumstances prepare these documents. More confused cases result from do-it-yourself legal documentation than from those that are handled professionally.

If you need a will or help determining what will happen to your property when you’re no longer around, I recommend that you speak with an estate-planning attorney. After all, it’s a “pay me now or pay me (more) later” situation. Take care of it, and your family will thank you.

Further Reading

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