Now that most of you have read parts I through 9 of this series and understand the Survivor’s Guide concept; it’s time to draft your will, possibly a living trust, health directives, and powers of attorney. Don’t be put off by the term "Estate Plan." It sounds too formal and may seem unnecessary for the average federal employee. Not so — we all need to put our personal estate in order — no matter how small — so when the time comes you leave your estate to those most deserving in your life.
Instead of labeling this activity "estate planning," a term that turns many off, it should be called simply "Retirement Planning" because without a proper plan that includes wills, trusts, and other important documents your present retirement plans are incomplete and inadequate. I use plural here because your spouse must also have these documents as well. Quicken WillMaker & Trust software along with the excellent book titled Plan Your Estate helped me through the process and I easily completed our basic wills, living trusts, and health directives at home after compiling my "Survivor’s Guide." In 2014 I hired an attorney to review and update our plans.
As mentioned earlier, whether or not you complete your wills and trusts using the books and software I mentioned above or hire an attorney you will still need all of the information in the "Survivor’s Guide." It is also beneficial to understand the basics of estate planning even if you get an attorney involved so you will be aware of the general concepts and to make informed decisions.
Wills are required to transfer your assets and personal belongings through probate to those in your life most deserving, assign guardianship for minor children, and select an executor who transfers your assets and administers the will. If you die without a will the State determines who gets what and when and without proper planning your entire estate may go through probate. Probate can delay distribution of your assets for up to a year or more and the estate must pay attorney and legal fees that are deducted prior to asset distribution. A will is an essential device to transfer any assets that are not transferred by some other means such as "Post on Death (POD)," joint tenancy, or beneficiary designations on accounts, living trusts, and all other residual estate assets.
A Will is the ultimate backup for a comprehensive estate plan. You can’t cover ALL assets in living trusts or be certain that all of your other accounts are 100% protected through POD, joint tenancy or beneficiary designations. Things tend to fall through the cracks even if you are diligent and update your estate plans frequently. If you receive an unexpected inheritance, gift or gambling winnings just prior to death these assets will transfer through your will. The book Plan Your Estate states, "If you have a will, the assets and property listed above will go to your residual beneficiary, who, by definition, takes ‘the rest of your property’—that is, everything that isn’t left to some specific named beneficiary."
Some assets are best transferred by a will such as an automobile if you don’t own it through joint tenancy. Insurance companies typically won’t insure automobiles that are owned by a trust. Other things like frequent flyer miles or bonus points that accumulate are best left in a will as well.
Another consideration is property or assets that you expect to receive through an inheritance or that are currently going through probate. Your residual beneficiary will inherit these assets as well.
Probate isn’t required in all states and Chapter 14 of Plan Your Estate lists each state’s applicable laws and limits. Most states permit some property and smaller estates to transfer free of probate or they allow a simplified process. There are two types of state exemptions. The first eliminates probate for property ranging from $5,000 to $100,000 and the second type allows for a simplified expedited summary court procedure with reduced costs. State laws and exclusion dollar amounts vary considerably. Even though small estates don't pay much if anything to probate a will it is still desirable to avoid probate if possible due to the potential delays in asset distribution after death.
A will is legal if the person is at least 18 years old, of sound mind, typewritten or printed on a computer, has at least one major provision leaving property to someone, appoints an executor, is dated and signed in front of at least two witnesses— three witnesses are required in Vermont. Prior to death wills are not recorded or filed with government agencies or need to be notarized. However, if the witnesses sign a notarized "self-proving" affidavit the witnesses won’t have to testify at probate hearings. A few states do recognized handwritten wills however they are not recommended.
There are several types of wills. The most common is a formal, witnessed will. However, there are also statutory wills; a preprinted fill-in and check box form that some states permit, Pour-Over Wills; a will that transfers to a trust upon death, oral wills, electronic wills, and video or film wills. For the most part it is recommended that you use a standard formal, witnessed will, like the ones offered in most will software packages including Quicken WillMaker & Trust. There are pros and cons for the use of a Pour-Over Will and these are more appropriate for unique situations such as setting up an AB living trust for tax savings or for other advanced estate planning techniques.
I have been asked on several occasions why I drafted individual and not a joint will for me and my spouse. Basically, joint wills aren’t recommended because of the limitations placed on the surviving spouse. In a joint will each spouse leaves all assets to the other and it continues to detail what takes place when the other spouse dies. The surviving spouse can’t change or revoke the will after the first spouse dies. This doesn’t leave the surviving spouse any options and in life things can change dramatically over time.
Before deciding what to put in your will you need to identify all of your major assets and determine how they will be transferred. Review the "Asset Allocation" sample spreadsheet that is posted online. Read the spreadsheet instructions and guide to understand the spreadsheet and the different asset transfer methods such as TOD - Transfer on Death, POD - Pay on Death, Beneficiary, Joint Tenancy, and Trusts. You can download a free blank spreadsheet to use for your personal assets.
Many estates only require a simple will and to specify beneficiaries, POD or Joint Tenancy designations for major assets such as savings accounts, certificates of deposit, checking accounts, insurance policies, mutual funds, savings bonds, and the Thrift Plan, etc. Use the free spreadsheet mentioned above to identify your assets and how they will be transferred. By specifying POD, joint tenancy, and beneficiaries your major savings and assets will transfer out of probate and often within several weeks to your heirs. All other assets will transfer through the will or possibly through a living trust. Mid sized to large estates may also need living trusts to avoid probate and distribute assets.
I used 3 valuable references for my estate plan and have mentioned them many times in this series. They have answered all of my questions and I was initially able to complete my estate plan without a visit to my attorney. However, there may be issues in your life that will require a visit to your attorney such as having a handicapped child, certain business interests, etc. Even though I initially completed our estate plans on my own I did eventually hire an attorney to review, modify, and update our documents as changes were needed and as time went on.
I keep the three books in my bookcase for reference and specify where they are located in my Survivor’s binder "Letter of Instruction."