Part 1: Why Do I Need a Will?

Life is an unpredictable journey, filled with twists, turns, and unexpected pit stops. While we’re all busy navigating the highs and lows, there’s one stop that’s inevitable for all of us — the end of the road. But have you ever paused to wonder what becomes of everything you’ve worked hard to accumulate when you’re no longer in the driver’s seat?

From treasured possessions to financial matters, legal wrangling to family dynamics, the posthumous fate of your estate is a complex web that deserves a closer look. So step into the driver’s seat now to ensure your loved ones are cared for and your assets are distributed according to your wishes when you are gone.

Here is a practical roadmap to determine how your estate will be handled in the event of your death.

Decide who will receive your assets

Having a valid will can ensure that your wishes regarding your estate will be carried out upon your death. In the process of creating a will, you decide who will receive your assets and under what conditions.

Also, a will allows you to name an executor to handle your final financial affairs, rather than leaving that decision up to the state. If you have minor children or other dependents, a will is the only place to name a guardian to take care of your dependents. Without a valid will, your minor children or other dependents will become wards of the state and the courts will determine with whom and where they live.

Determine what assets will be transferred outside the will

While it’s important to have a will, there are some parts of your estate that will be managed outside of the legal system, whether you have a will or not. These are assets that transfer automatically to beneficiaries.

For example, if you have jointly owned bank accounts, they will transfer automatically to the joint owner upon your death. Similarly, bank accounts with payable-on-death beneficiaries will transfer to the beneficiary upon presenting the death certificate.

Other assets that will transfer automatically include any assets in a living trust and pensions or 401(k) retirement accounts that have a named beneficiary. Life insurance policies also transfer automatically to the named beneficiary. It’s important to make sure you update your beneficiaries anytime you have a life change, such as a marriage, divorce, adoption, or any additions to the family.  

Finally, real estate with a surviving joint owner will transfer directly to the surviving joint owner. Some states allow for a quit claim deed, which provides for heirs to automatically receive the property without going through probate, the court-supervised process of distributing assets after a person’s death.

Understand that probate may be necessary

Many families assume that if there is a valid will in place, they can avoid going through probate. However, even if you have a will, some assets may be required to go through the probate process. 

Any property or assets that have only your name on the title at the time of death must go through probate. If you want to keep your home or other real estate out of the hands of the court system after your death, it’s a good idea to legally name a joint owner while you are living. That way, the property will go directly to the surviving joint owner when you die.

Keep in mind that adding a joint owner creates an asset of that joint owner. If he or she files for bankruptcy, then the shared asset could be attached to the bankruptcy. Setting up a living trust would be a way of avoiding these pitfalls.

If the total value of your estate falls below the limit set by your state, however, probate may not be necessary, even if you solely own your assets. The threshold for probate differs by state. An estate can also avoid probate if all assets are held in a revocable trust or living trust, owned jointly with another person, or titled as payable upon death to a beneficiary.

If your estate’s total value is above your state’s limit for probate, and your home, car, bank account, or other asset is owned solely by you, it will have to go through the probate process. In that process, your personal representative will appear before the court and will be responsible for ensuring that all your debts are paid before distributing the assets to your heirs.  

Part 2: Who Will Take Care of My Dependents If I Die?

No parent wants to consider the unthinkable, but planning ahead for the care of your children in case of your untimely death is an important part of estate planning. In fact, if you don’t take steps to legally plan for the care of your minor children, adult children with disabilities, or other dependents, you will have no say in what happens in the event of your death.

As difficult as it may be to think about no longer being here to care for your minor children or other dependents, making a plan for them is an important part of loving and caring for them. You can handle the planning with these steps.

Name a guardian

The best way to set up guardianship for your dependents in the case of your death is to name a guardian for them in your will. If you die with a valid will that names a guardian for your children, you can rest assured that the decision will be handled the way you wish.

Choosing a potential guardian for your dependents can be tricky. Many parents choose close family members or friends. In making the decision, consider the age, financial means, free time, and geographic location of the person or people you’re considering as guardians.

The legal requirements for prospective guardians vary by state, but generally, a guardian can be anyone who is at least 18 years old, not currently incarcerated, and of sound mind. When you’ve made a decision, don’t actually name the person or couple as guardian in your will until you have first talked to them and made sure they are willing to accept the responsibility.

Sometimes, a potential guardian may agree when asked, but when the time comes, their situation has changed and they are no longer available physically, mentally, or financially to care for a child. Consider naming a first-choice guardian in your will, along with one or two alternates, in case the first choice is unable to care for your dependents.

Think about your child's needs in full

When planning ahead for your children to be cared for in case of your death, take time to consider both their physical and financial needs. Your children will need a physical guardian to take care of them on a day-to-day basis, and they will also need a fiduciary, to manage their inheritance until they are old enough to manage it themselves.

These two roles — physical guardian and financial fiduciary — can be filled by the same person, divided between separate people, or a bank trust department can be named as the fiduciary. If you name a fiduciary separately from the physical guardian, the fiduciary will manage the financial assets that you leave behind for your children until your children reach the age at which you have specified, they can access their inheritance.

If you name two separate people to handle your children’s physical and financial needs, make sure they are willing to work together in the children’s best interests. It’s best to have a discussion with both of the people about your wishes before naming them in your will.

Avoid leaving the decision to the state

Because thinking about your own death and the repercussions for your family is such a difficult topic, it’s easy to understand why many parents avoid naming an official guardian for their children. However, worse than considering the unthinkable may be what happens if you don’t establish guardianship in a valid will.

If you have not established guardianship for your children and you die, the state determines where your children will live and with whom. In most cases, a state court will attempt to place children with family members after the death of the parent(s). If one parent dies, children usually will be placed with the other parent. If both parents die, the court will find and screen other family members for suitability.

During the process of finding and screening family members, children are usually placed in the state’s foster care system. If no willing family member is found suitable by the court, your dependents could be placed in foster care permanently or until they reach the age of emancipation in your state.

Take time now to plan ahead for the care of your children in case there’s ever a need. Choosing a guardian and creating a will may not be enjoyable, but it will protect your family from the unknown in case of the unthinkable.

Part 3: How Can I Make Sure I Leave My Estate in the Right Hands?

One of the most important components of estate planning is choosing the people who will manage your affairs when you are gone. You may have very specific plans for your assets and your dependents, but in your absence, you will need others who understand your plans and will make sure they are carried out.

The person who will be tasked with managing your assets and distributing them according to your will is your personal representative, also known as your executor, or your trustee if you have a living trust. If you have minor children, adult children with disabilities, or other dependents, you’ll also need a guardian who will be responsible for their care in the event of your death. An estate planning attorney can help you complete all the legal documents you’ll need to ensure your representatives are charged with handling everything according to your plans.

Create all necessary documents

You can find estate planning templates and documents online, but many people turn to an estate planning attorney (which our experts recommend) to ensure their documents are valid and complete. Whether you consult with an expert or take the do-it-yourself route, make sure you prepare all the necessary legal documents for complete legacy planning. Those documents include: 

• Will: Ensures that your property will be distributed according to your wishes. You may also want to prepare trust documents, which can help limit estate taxes or legal challenges. That’s because any assets held in a trust automatically go to the beneficiaries named in the trust and avoid the probate process.
• Revocable Living Trust: A living trust can be used as a substitute for, or in conjunction with a will. A trust also provides for the distribution of your assets upon your death and, because it can exist beyond your death, keeps property titled or included in the trust from passing through probate. It is faster and less costly to distribute your estate with a trust than with a will alone.
• Durable power of attorney: Appoints an agent or a person you assign to act on your behalf when you are unable to do so. Without a power of attorney in place, a court will be left to decide what happens to your assets if you are no longer capable of doing so.
• Beneficiary designations: Make sure that beneficiaries are updated on any assets that can pass directly to an heir without being included in the will. For example, if you’ve been married, divorced, or added new family members, you may want to change your beneficiaries on all assets that include beneficiaries. These assets may include life insurance policies, 401(k) or pension assets, bank accounts, and investment accounts.
• Letter of intent: A letter you write to your executor or beneficiary to explain your intentions for particular assets. It can also include your preferences for funeral plans or other special requests.
• Health care power of attorney: Designates another person to make health care decisions for you in the event that you become unable to make those decisions for yourself. If you have specific wishes for how various healthcare scenarios should be handled, this document can include those wishes.
• Guardianship designations: If you have minor children or other dependents, include a guardianship clause in your will to name the person or couple that you have chosen to take care of your dependents in the case of your death. Before naming a guardian, it’s wise to talk to the person and make sure they are willing to accept the responsibility. 

Choose your personal representatives

In creating all your estate planning documents, take care to select an executor, or trustee, to ensure that your final wishes will be carried out. Include an executor clause in your will and a successor trustee clause within your revocable living trust to make sure your final financial affairs will be handled by the person or entity that you trust.

If you only have a will and neglect to name your executor, the state will appoint someone to handle your final affairs. Usually, the state will name the next of kin or a lawyer. That person may or may not be informed about your wishes for your assets, and their decisions may not be the ones you would have made.

Before naming one, talk to the person or members of the entity you plan to name to make sure they are willing to handle the responsibilities of executor or trustee. A named executor or successor trustee can choose to refuse the position, and in that case, your estate may end up in court where another person or entity would be named to administer the estate.

By selecting the right people to carry out your wishes upon your death, you can have peace of mind with the knowledge that your estate will be left in the right hands.

As your journey continues, we hope this guide has helped illuminate the road to an estate plan that secures your wishes, before the journey ends.

Don’t leave the importance of estate planning to chance. Reach out to our experienced financial experts to ensure your wishes are met.