IMPORTANCE OF HAVING A ‘WILL’
Lal Varghese, Attorney at Law, Dallas
Death affects people in many ways and it is never timely. Death confronts the family with bereavement, with the need to readjust emotionally and financially, and often with an unknown future. Death is not only a personal issue, but also a legal one as well by which a death certificate must be issued, and the estate of the deceased individual (the decedent) must pass to others. A Will is a legal document that determines how your property (estate of the deceased both real and personal) is distributed and in what proportion after your death. In a Will, you may name beneficiaries like family members, friends, spouse, or charitable organizations etc., to receive your property according to your wish. You may list specific gifts, such as house, car, jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets that your Will does not dispose of by specific gift. Property distributed under the terms of the Will is known as the "probate" estate. In addition to distributing or transferring property upon death, a Will may have other functions. It may be used to name a guardian for any minor children or to create a trust and designate a trustee to handle an estate (property left after death) on behalf of children or others. You may nominate a person to be responsible for your child's care if you and your spouse die before the child turns 18. If you do not have a Will or have a Will and do not name a guardian for your child, the State law provides for immediate custody of your child and management of their property until a proper guardian is appointed by the Court. You may also name a guardian-who may or may not be the same person-to be responsible for managing any assets given to the child in your Will, until he or she is 18 years old. You may nominate a person or institution (Executor) to collect any debts and manage the probate estate, pay any debts, expenses and taxes that might be due, and then, with the court's approval, distribute your assets to your beneficiaries according to the instructions in your Will. Your Executor serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your Executor carefully.
A Will generally does not cover everything you own. It affects only those assets that are titled in your name at the time of your death. Those assets that are not affected by your Will include: The cash proceeds from a life insurance policy on your life are paid to whomever you have designated as beneficiary of the policy issued by the insurance company no matter who the beneficiaries under your Will may be. Assets held in retirement plans, such as a 401(k) or an IRA, are transferred to whomever you have named as beneficiary in the plan documents no matter who the beneficiaries under your Will may be. Assets owned as a joint tenant with right of survivorship (JTWROS) such as real estate, automobiles, bank accounts and stock accounts will pass to the surviving joint tenant upon your death, and not in accordance with any directives in your Will. Certain securities and brokerage accounts include a designation of primary and contingent beneficiaries to receive the assets in that account when the account owner dies. The names of the beneficiaries are preceded by the words "transfer on death (TOD)". Other assets, such as bank accounts and U.S. savings bonds, may be held in a similar form using the owner's name and the beneficiaries' names preceded by the words "paid on death (POD)."
Married couples may hold title to their community property assets in their names as "community property with right of survivorship." Then, when the first spouse dies, the assets pass directly to the surviving spouse without being affected by the Will. Similarly, assets held in a Revocable Living Trust are distributed according to the instructions in the trust regardless of the instructions in your Will with no need for court supervision. You can name yourself as the initial trustee of your Living Trust which most people do, and then name a successor trustee to manage the trust if you become unable to do so. With a Living Trust, your assets are managed for your benefit during your lifetime and then transferred to your beneficiaries when you die without court supervision. A Living Trust is more recommended than a Will for two main reasons, one – there is no need to probate or court supervision like a Will, secondly, you can save taxes when the property is transferred to a trust for the benefit of the beneficiaries even after your death. You may make a provision in your Will for your assets to be distributed to a trust upon your death. When trusts are created under a Will, they are known as Testamentary Trusts. With an appropriate beneficiary designation, Testamentary Trusts can even be beneficiaries of life insurance policies and retirement plans. If you have a Living Trust, (that is, a trust established during your lifetime) then your Will is often referred to as a Pour Over Will. Such a Will includes instructions to transfer all remaining assets (assets that were not transferred to your Living Trust during your lifetime) to the Living Trust at the time of your death.
In States like California and Texas and few other States having community property law, any assets acquired by you and your spouse from earnings during your marriage are community property. You and your spouse own equal shares of those assets. Your Will, therefore, affects only your half of the community property. Assets that either of you owned before your marriage and gifts or inheritances acquired after your marriage are usually separate property. Your Will affects all of your separate property assets and not only the half. A person does not need to have a large estate to plan and prepare a Will. Anyone who owns property, whether "personal property," such as cash, stocks, jewelry or furniture, or "real property," such as land and/or a house, should prepare a Will. If married, each spouse should have separate Will. A Will prepared and executed in United States covers all your property wherever it is situated and it is valid in any courts of law wherever you have property. A Will may need to be probated in each country wherever you have property unless the country recognizes the Will probated in United States under treaty laws. Note: Some States recognizes Domestic Partners also in the same position as married couples with same right of survivorships.
When there is no valid Will, the person is said to have died "intestate." In such cases, a court appoints an administrator to handle the decedent's affairs, and his or her property is then distributed according to a formula fixed by law. The laws for distribution of an intestate estate are rigid and generally do not make accommodations for those in unusual need. After payment of taxes, debts, funeral expenses and administrative costs, the property goes to the surviving spouse, children and/or relatives. The laws are specific in each State as to how property is to be distributed, including which relatives have priority and how the property is divided. The inheritance rights of adopted children are protected when a parent dies without a Will. Under most State laws including Texas Probate Code, an adopted child is treated the same as a natural born child. Therefore, the adopted child can inherit from his or her adopted parents and vice versa. The adopted child can also inherit from his or her natural parents, but the natural parents cannot inherit from the child if the child dies without a Will. This is an important consideration today when often an adopted child seeks and discovers the identity of a natural parent and then establishes a relationship with that parent.
Each State has its own laws that determine the requirements for a legal Will. In most States, the Will must be written, dated and signed; The person who makes a Will (called a "testator") must be legally competent and acting voluntarily (of sound mind and free of any improper influence), and be at least 18 years old; and the signing of the document must be witnessed by at least two legally competent individuals (one of whom may be a notary public) and signed in strict accordance with technical formalities. Witnesses do not need to know the contents of the Will and should not be beneficiaries (persons who will receive something) of the Will. Handwritten (or "holographic") Wills that are not properly witnessed are invalid in some States only. Some States have ‘Statutory Will’ which contains fill in the blanks and is valid in that State only when executed properly. A Will prepared by an Attorney, who is specialized in Estate Planning Laws is the best choice for anyone living in any State. A Will made in another State in accordance with that State's requirements is valid in most States. But it will be better to check with an Attorney in the State where you live if you move from one State to another after you make a Will.
Probate is the legal process by which the affairs of a deceased person are settled and title to his or her property is transferred to the heirs. A Will is effective only at death and may be changed or revoked at any time before death. A Will should be revised to reflect any changes in circumstances, personal choices or resources. Changes are often made by a simple document called a codicil (a supplement to a Will), or by redrafting the Will. An attorney should be consulted when making changes to ensure that changes are legal and properly made. Also, keep in mind that your Will is not a Living Will. The term Living Will is used in many States to describe a legal document that states you do not want life-sustaining treatment if you become terminally ill or permanently unconscious and also you designate your spouse and/or your children to make decisions about your continued treatment when you are declared by Doctors in comatose condition.
A Will should be reviewed and updated as your conditions and circumstances change. For example, changes may be necessary when: the family structure changes as a result of a birth, adoption, marriage, divorce or death; substantial changes occur in the amount or kind of property owned; tax laws change; residence changes from one State to another; the designated executor, guardian or trustee can no longer serve; or you decide - for any reason—to change the distribution of your estate. A Will is valid until legally revoked or changed, and becomes final or effective upon its maker's death. In the event of a divorce, a Will automatically excludes the former spouse unless it expressly states otherwise. Complications could result, however, if no property settlement agreement of the divorce exists. Periodic reviews are important to make sure the Will conforms to changing laws - as well as the Will-maker's intentions. The signed original document should be kept in a safe place. As with all vital papers, a Will also should be stored where it is protected (such as a bank's safe deposit vault), yet readily accessible when needed. Arrangements should be made for the Will to be immediately available to the decedent's Executor.
A copy of the Will that notes the location of the original document, and a letter of instruction that contains numbers for bank accounts, insurance policies, credit cards or other financial details, and family details should also be prepared. The letter may also contain instructions regarding burial, cremation or anatomical gifts, and should be given to the executor or Will-maker's attorney. Because this letter may function as a plan for handling important estate matters, it should be as complete as possible. Considering its importance, the cost of making a Will is modest. A properly drawn Will should reduce expenses (and in some cases, taxes), while simplifying the administration of an estate. Fees for preparing a Will and drafting the necessary documents depend on an attorney's experience and expertise, the complexity of the situation, and the amount of time spent counseling clients and preparing documents. Approximate costs should be discussed when first consulting an attorney.
The advice of an expert on this complex subject could prove invaluable in preserving the value of the estate and assuring that property is distributed as intended. Advance planning for the distribution of property; specific bequests (gifts); and the naming of an Executor, Guardian or Trustee can also help save time and money. Therefore, before seeing an attorney, think about your estate planning objectives and make preliminary decisions about the distribution of your property. You can facilitate the process, and control costs, by preparing an inventory of your assets and listing your various bank accounts; stocks and bonds; insurance policies; and any profit sharing, retirement and pension plans. Assets that are transferred to either your spouse (if he or she is a U.S. citizen) or to charitable organizations are not subject to estate taxes. Assets passing to other individuals or entities will be taxed if the net value of those assets is more than $2 million. That amount will increase to $3.5 million in 2009. Then, in 2010, the estate tax will disappear completely. In 2011, however, unless Congress changes the law, the exemption will revert back to $1 million. In short if your assets are less than 1 million (not jointly owned), there is no estate taxes to be paid by your beneficiaries. But if you have assets more than 1 million, then you may consider about Living Trusts as part of your estate planning and should not end up with a simple Will.
Drafting a Will is an important and sometimes complex matter that involves the judgment and skills of an experienced attorney. It is a critical process that requires legal knowledge, informed decision-making, and coordination with other estate planning documents. Although "do-it-yourself" forms and kits are available, they may not consider individual circumstances and relationships, and could cause litigation, contested Wills and other problems in transferring property to heirs. An attorney can assist and advise by analyzing individual circumstances and preferences, drafting valid documents, and avoiding pitfalls that alter intent.
