GAINESVILLE, Ga. (BP)–Most people recognize the need to have a will, but they never get around to having one written. If they died today they would leave the distribution of their assets to the state. This represents poor stewardship. Solomon said, “A sensible person sees danger and takes cover, but the inexperienced keep going and are punished” (Proverbs 22:3).
You may have had a valid will at one time, but either the witnesses have died or the state laws have changed, invalidating your will. Whatever the reason, the simple truth is that if your will cannot be probated — proved in court — it is worthless.
The state agency that handles intestate (having no legal will) properties will divide them among the surviving heirs as the agency sees fit, after extracting probate costs, state inheritance taxes, and federal inheritance taxes. And, if both spouses should die in an accident, would you want the state to handle the guardianship of your children?
It’s a pay-me-now or pay-me-later issue. Either spend a few hundred dollars in attorney costs now, or your estate may have to spend several times that in court costs before the assets are distributed. Even a simple will can avoid these problems, but estates consisting of larger assets may find a trust more advantageous. To understand the kind of estate planning that is best for your family, the following may help.
In most states, you can draft your own will. However, rules that govern self-drafted wills vary from state to state, and you must thoroughly understand the laws of your state to ensure that your will is valid in court. For this reason all wills should be proofread by an attorney.
For a will to be probated, a judge generally requires that the will be verified. If you used only two witnesses and the state requires two, both must be alive and able to substantiate the general contents of the will. It is best to have three or four witnesses, because if less than the required are available, you will need to amend your will with a codicil to have other witnesses verify it.
If you keep your will in a safety deposit box, be sure that someone else has access to the box. Safety deposit boxes cannot be opened except by court order, and the process can be lengthy and expensive. So name your spouse, attorney, or accountant as authorized signatories.
When you change residences from one state to another, you need to have an attorney in the new state review your will to be sure that it conforms to that state’s laws. Generally, your estate is governed by the state in which you reside at the time of your death. Therefore, if you own property in another state, a valid will drawn in your state of residence will most likely control the distribution of assets in another state.
Even if you and your spouse hold all of your property in joint tenancy, you still need a will. Joint tenancy means that the surviving tenant owns the property if the other tenant dies, but if there are assets owned outside the joint properties they will not be covered. Consult an attorney to determine how jointly owned properties are handled in your state, in case of the death of one of the owners.
You can name anyone you desire to act as executor of your will and estate. That person’s duties are to probate the will and distribute the assets according to the dictates of the will. Unless otherwise stipulated, if you have named an out-of-state executor, your state may require the out-of-state executor to post a bond. Sometimes the bond is equal to the value of the estate. If you choose to use a professional executor, be sure any fees are clearly spelled out in a contract and attached to the will or trust.
A trust is a legal contract to manage someone’s assets, before and after death. The two basic types of trusts are living trusts and testamentary trusts. A living trust is drafted and implemented while the assignee is still living. The living trust can be either revocable or irrevocable. If it is revocable, the assignee reserves the right to modify the trust as long as the assignee is alive. If the trust is irrevocable, the trust cannot be changed once in force, nor can the property assigned to the trust be recovered by the donor. A testamentary trust is valid when the person dies.
One advantage of a trust is that it is not a public document, like a will, and does not require probate, thus ensuring privacy. In many cases, assets held in trust could be free from estate taxes.
Estate taxes that must be paid depend on the value of your estate at the time of death. Through a marital deduction allowance, each spouse can leave the other an unlimited amount of assets. However, assets left to someone other than a spouse are subject to estate taxes. Estate taxes are usually due within six months of death.
Generally, the state requires an appraisal of the estate and taxes are due and payable at that time. Both the state and federal tax collectors normally will work out a plan to pay the taxes so that the estate doesn’t suffer a severe dilution through a forced sale. Liquidity, or cash, in an estate is very important, since taxes must be paid in cash; otherwise, assets must be sold to satisfy the tax obligation.
If you change your mind after writing a will, you can change it through the use of a codicil. The codicil is subject to the same laws of probate, so it is important that it be drafted properly. Attach all codicils to the original will and store them together. Only the original will or codicil is probated, so protect them carefully.
Some estimate that 80 percent of all American adults have no valid will. If they died, they would leave the distribution of their estates and guardianship of their children to the state; plus the estate might have to pay a sizable amount of taxes and fees.
In order to ensure that the estate has to pay the least amount of taxes and that your estate is rightly distributed as you would want it to be divided, a will is mandatory.
Benjamin Franklin said, in “Maxims Prefixed to Poor Richard’s Almanac,” “Never leave that till tomorrow which you can do today.” If you already have a legal, up-to-date will, you are to be commended. But, if you have none, or it’s out of date, get it done as soon as possible.
Howard Dayton is CEO of Crown Financial Ministries. Dayton and the late Larry Burkett joined forces in 2000 when Crown Ministries, led by Dayton, merged with Christian Financial Concepts, led by Burkett. The new organization became Crown Financial Ministries, on the web at www.crown.org.