Naming beneficiaries, an executor, and dividing assets are important parts of writing a will. Learn about estate planning and how to write a will.
One of the many unfortunate realities of this year's COVID-19 pandemic is just how impactful a life-threatening illness can be for even the healthiest people. In the wake of the global health emergency, many people are paying increased attention to an often neglected element of their personal and financial affairs: making a will.
Although making a will might seem like a daunting prospect, the reality is that even the simplest will can be essential in helping your loved ones follow through on your wishes. Not having a will, on the other hand, can cause a variety of problems—including the threat of prolonged legal battles. Making a will is easy, inexpensive, and only takes a few steps.
Evaluating Financial and Estate Considerations
Wills are important because they spell out your specific wishes for what friends and loved ones should do with your estate. This is a crucial factor for everyone irrespective of net worth, as not having a will that lays out legal obligations for how your successors handle your finances can lead to expensive legal challenges (and quickly).
When preparing your will, begin with a full accounting of your financial holdings and current assets. Cash, real estate, or any other personal property should be mentioned with clear instructions on who should receive what. Having a set of explicit instructions within your will helps make your intentions clear to your survivors. Plus, if you want assets to go toward the care or future needs of children, setting clear directives can help ensure that their parents or guardians can’t use the funds in a manner that deviates from what you wanted.
If you intend to pass financial assets on to your next of kin, you may not necessarily need to restate all of these wishes in a will. For example, your designated beneficiaries on a life insurance plan will receive the policy payout without the need for a will. Having a clear set of instructions is still a good practice to have, though, as it can forestall any court battles that might come about regardless.
Factoring in Any Business Dealings
If your financial affairs include ownership—be it full or partial—in a business or investment venture, you will want to make sure that your desires for how they should be handled are clear in your will. Small business owners should include a succession plan in their will, especially if there are several family members who are currently (or aspire to be) part of the business. The same holds true for those who are stakeholders or partners in a business as well. Without a clear plan in place, legal challenges become all the more likely.
If you own a business or are a partner in a business venture, it’s crucial that you spell out your desires by way of a will. This is the most surefire way to ensure that your business interests go to your child, spouse, or another party. If this information isn’t spelled out explicitly in a legal document, there’s a strong possibility that interested parties may try to resolve these questions in court.
Every business owner’s will should include a buy-sell agreement. These agreements establish the price of any sale of a business or business interest. They can also allow you to prevent specific people or entities from being able to have a role in the business and prevent beneficiaries from selling your business interests after you’ve passed. If you permit your family members or beneficiaries to sell, this document will serve as their benchmark for what constitutes a reasonable offer.
Including Beneficiaries in Your Plans
Sizing up your estate is the first step toward creating a robust will. Next, you'll have to take stock of who you'd like to include in your will—this means determining who (or what organizations) you would like portions of your estate to go to. This is entirely up to you: you can choose to leave some or all of your estate to friends, family, neighbors, or charities. Most wills consist of a blend of each of these categories.
Designating beneficiaries may be easier for some than others. If you have a clear idea of who should receive your belongings or financial holdings, adding beneficiaries into your will can be as easy as including their names and specific instructions on what they should receive. In other cases, such as uneasy family dynamics, you may want to think strategically about who you want your estate to go to—and make explicit plans to prevent others from accessing your assets. Legal professionals can help you set up an iron-clad will that reflects these wishes, and prevents excluded parties from having enough of a legal argument to take others to court over your affairs.
Maintaining Flexibility with Your Will
One common misconception about wills is that they are set in stone or hard to update once they have been legally validated. This couldn't be further from the truth. In fact, making changes to one's will can be as easy as revising the current document one's self, or by conveying one's new wishes to their legal professional.
In fact, wills are easy to update as your individual needs or desires change. Typically, all one needs to do in order to update a will is work with a legal professional who can incorporate changes and have new versions of the will legally finalized. In fact, many legal experts recommend that people update their will frequently as they age in order to make sure their wishes are accurately reflected. This is particularly helpful if your finances or health begin to change, or if there are new members of your family that you want to include. In most cases, updating a will is a straightforward and relatively cost-friendly process.
Determine Your Specific Needs
Every person's financial and family situation is unique, which means that accounting for the specifics of your own scenario is crucial. For some, making a will might be somewhat simple: there are standard templates that are readily available online that can serve as a great starting point. For those with more complex needs, it may be worth enlisting the help of a legal professional.
Complicated estates call for a more nuanced approach to drafting a will. This might include the establishment of a trust that can hold your assets in a tax-advantaged manner. Failure to do so could mean major taxes for your beneficiaries, and might not give you as much flexibility to determine who should receive what—and when. Trusts give you the additional latitude to dictate the terms under which beneficiaries can access what you’ve left behind for them.
This is far from the only unique scenario one might encounter while establishing their final wishes. Other factors, such as major donations to charities or foundations, should also be dealt with either by way of a detailed will or further instructions. Legal professionals can help walk you and your family through these processes.
It's natural for many people to approach their end-of-life considerations with a bit of trepidation. Few people like to think of what might happen after they're gone. Doing so, however, makes life easier for those we care about the most. A clear, current, and comprehensive will ensures that your legacy lives on the way you want it to. And, if for nothing else, it spares those you care about from having to interpret vague instructions or, worse yet, go to court.