In the first part of this series it was point­ed out many of the ridicu­lous and frankly lame excus­es peo­ple often give for not prepar­ing (“get­ting their affairs in order” as the old say­ing goes) for their ulti­mate demise. Regard­less of a dis­as­ter, we are all going to meet the same fate in the end. Some­times unex­pect­ed­ly, but often the nat­ur­al con­clu­sion of a long life. Death can­not be avoid­ed.

To con­tin­ue my train of thought from the first part, I am also con­stant­ly amazed at the num­ber of intel­li­gent, hard­work­ing, often pro­fes­sion­al peo­ple I meet who do not have even a basic will (i.e. Last Will & Tes­ta­ment). They usu­al­ly assume what­ev­er they own will just go to their fam­i­ly and that’s that.

You know what hap­pens when you ‘assume’.

When you die every­thing you own of val­ue is added up and that forms your “estate”. This includes actu­al mon­ey, invest­ments, your 401k and IRA’s, any homes or oth­er real estate prop­er­ty you own, your vehi­cles, boats if you have, any col­lec­tables (espe­cial­ly art and things of real val­ue), any intel­lec­tu­al prop­er­ty you may own or have an own­er­ship in (trade­marks, patents, copy­rights etc), busi­ness inter­ests or own­er­ship, even your sports equip­ment, etc.

A will gives your instruc­tions how you want your estate prop­er­ty to be divid­ed and trans­ferred to oth­ers after your death. Peo­ple can con­test a will in court if they dis­agree with it (for exam­ple, it’s dif­fi­cult to cut out a spouse or child entire­ly from a will) but that isn’t as com­mon as tabloids would lead you to believe. The will also state who you des­ig­nate to over­see the dis­tri­b­u­tion of your prop­er­ty in accor­dance with your instruc­tions (i.e. the Execu­tor of the estate).

Dying with­out a will is called dying “Intes­tate”. If you die with­out hav­ing a legal­ly exe­cut­ed will (the def­i­n­i­tion of which can vary and is beyond the scope of this arti­cle) then all your prop­er­ty is dis­trib­uted accord­ing to the pro­bate laws of the state where you reside. A spe­cial court, the Pro­bate Court, is peti­tioned for the dis­tri­b­u­tion of your prop­er­ty and only under the court’s direc­tion accord­ing to the laws of your state is your prop­er­ty passed to oth­ers. In essence, that means if you don’t make your own will the state has a one-size-fits-all will for you. And I assure you that one-size-fits-all will does not pro­vide near­ly as much gen­eros­i­ty and pro­tec­tion as you may want for your prop­er­ty and loved ones.

Peo­ple often argue for not hav­ing a will that they don’t own much or have lit­tle per­son­al wealth. So what! You could win the lot­tery tomor­row. Wills can be writ­ten gener­i­cal­ly (and often are) instead of for spe­cif­ic dol­lar amounts or spe­cif­ic prop­er­ty.

For exam­ple, movies and TV often show a will say­ing “To my broth­er I leave X‑dollars”. Instead, the will can writ­ten to say “I leave by broth­er 10% of my worth after final expens­es.”  The lat­ter has the advan­tage of being dynam­ic based on the val­ue of your estate – you may be worth $1 mil­lion or $100 but 10% is 10%.

Anoth­er issue aris­es when leav­ing prop­er­ty to chil­dren. Most chil­dren (heck, most adults too!) can­not han­dle mon­ey. Do you think a 10 year old can han­dle inher­it­ing a house? Or a teenag­er intel­li­gent­ly man­age inher­it­ing life insur­ance pro­ceeds? Most like­ly not. In a will you can spec­i­fy the cre­ation of a trust or mul­ti­ple trusts (called Tes­ta­men­tary Trusts) that forms after your death and what prop­er­ty you want put into the trust (as well as name a trustee to over­see the trust). You can then spec­i­fy when and how much of the prop­er­ty to dis­trib­ute to the chil­dren as you think they would be able to prop­er­ly han­dle it.

(Foot­note: In the case of minor chil­dren being the pri­ma­ry inher­i­tors almost cer­tain­ly the courts will appoint a “Guardian Ad Litem”, a lawyer that rep­re­sents and advo­cates for the legal inter­ests of the minor chil­dren. The Guardian Ad Litem will like­ly peti­tion for a finan­cial advi­sor to be retained or a trust be estab­lished to over­see the assets left to the minor until the age of major­i­ty at a min­i­mum.)

For exam­ple, you could spec­i­fy that if you die before your child reach­es the age of 21 some amount of your prop­er­ty be put into a trust. Then one third of that prop­er­ty be giv­en to the child when they reach 25, anoth­er one third of what remains when they reach 30, and the bal­ance when they reach 35. This way, hope­ful­ly, the child has learned over their life how to man­age mon­ey and be less like­ly to squan­der it on say a new fan­cy sports car or new musi­cal instru­ments for their garage band, etc. (It hap­pens a lot!)

A pro­bate court does not con­sid­er any char­i­ty or gifts you may want to do. For that you need to spec­i­fy gifts and char­i­ta­ble dona­tions in a will. As with a giv­ing to friends and rel­a­tives in your will, you can spec­i­fy a spe­cif­ic dol­lar amount or a per­cent­age of your total worth at the time of your death.

Fur­ther, in your will it is com­mon to name guardians for your minor chil­dren. Oth­er­wise they poten­tial­ly may be wards of the state (fos­ter) until a pro­bate court fig­ures it all out. You do not want your chil­dren in the fos­ter sys­tem ever!!

Final­ly, a will isn’t set in stone. Wills can and often are changed sev­er­al times over the course of a per­sons’ life as their cir­cum­stance change. I do rec­om­mend strong­ly spend­ing a lit­tle time with an estate plan­ning lawyer (pay their fee, it’s worth it!) to under­stand your sit­u­a­tion now and what is like­ly in your near future. But even a basic online will is bet­ter than noth­ing.

There are many more issues and points regard­ing wills and estates. This arti­cle isn’t meant as a com­plete les­son on estate plan­ning.

I hope as a prep­per you do real­ize prepa­ra­tion is more than dis­as­ter readi­ness. Life hap­pens more often than emer­gen­cies.


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