Creating a will is a necessary part of the estate planning process. However, there are certain things a will does not cover. Instead, it is just one crucial document among many involved in estate planning.
Why You Need a Will
Writing a will means creating a legally binding document. In it, you state who receives your property at the time of your death. A will can also appoint legal representation to carry out your requests and name who will become the legal guardian of your children. Understanding how you file probate is the starting point you can discuss with a good lawyer.
“Property that is distributed after your death goes through probate. Probate is the formal court process for deciding how to divide up your property,” says Jennifer C. Fu, from Amity Law Group, LLP. “If you do not have a will, your estate is distributed according to state law rather than your requests.”
Property a Will Does Not Cover
Although a will is one of the main ways to transfer property after death, there are certain things that it cannot cover.
For starters, any jointly held property cannot be transferred by a will. For example, if you and your spouse bought a house together, both tenants have equal ownership over the property. When a joint tenant dies, their portion of ownership of the property no longer exists. This means the other involved party now has full ownership of the property.
Similar rules apply to any property placed in a trust. The property would pass to the beneficiaries of the trust rather than your will.
Financial accounts, like pay on death accounts, will be passed on to the account beneficiary and bypass probate. Retirement plans are treated the same way, with the named beneficiary taking control of the account. A surviving spouse usually becomes the automatic beneficiary of a 401(K) under federal law.
Life insurance policies are also passed to the named beneficiary on the policy. Moreover, any stocks or bonds being held in accounts that transfer on death to a designated beneficiary will do so.
Items You Should Not Have in Your Will
Aside from the property listed above, a few other items should not be included in a will.
Do not include funeral instructions in your will. Sometimes wills are not found until long after funeral arrangements have been made. Instead, keep these instructions somewhere easily accessible, and tell your loved ones where they can be found.
Provision for a Pet
A provision for a pet should not be in your will, either. For one, you cannot leave money directly for a pet. You can, however, leave the pet and money to care for the pet to a specific person in your will.
In this case, though, the caregiver is not legally obligated to care for the pet. Instead, you might want to create a pet trust for this purpose.
Provision For a Child With Special Needs
A will is generally not the best way to leave money for a child with special needs. Receiving this sort of inheritance can make them ineligible for other benefits. It is usually preferable to set up a special needs trust for the child instead.
Talk to a Lawyer About Your Will
To know precisely what you should and should not include in your will, find a lawyer to help you through the process. Anyone writing their will should have guidance on what can and cannot be included, along with advice on the other documents needed for proper estate planning.
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