Serving as a foundational part of most estate plans, a last will and testament (a.k.a. will) is a legal document that declares, among other things, a person’s wishes as to how their property is to be distributed upon their death. When a person dies intestate (without a documented will), their estate is handled and assets are distributed according to the laws of their state.
A will can help make sure money and property get to the right person(s). Even in situations where asset distribution should be simple, such as when a person is married with no kids, having a will on file can prevent headaches and administrative burdens.
Before digging in, let’s define a few terms:
- Testator – refers to the person that has made the will whose wishes the will is intended to carry out
- Beneficiary – refers to any person, organization, or entity that stands to receive assets from the testator according to the will
- Executor – also commonly referred to as a personal representative, this person is responsible for carrying out the terms of the will, ensuring assets are appropriately distributed to beneficiaries
- Probate – the legal process required to settle a deceased person’s estate, including the distribution of their assets and settlement of debts
Although this has already been alluded to above but it’s important to have a will. First and foremost, it gives a roadmap to your loved ones in the event you pass. Even if you have the best kids in the world and they’ve always gotten along great, your passing might be difficult on them and agreeing on big decisions could be tough. Having a clearly laid out plan that states what you want to happen with your assets is a way to take one major burden off of them in the future.
Please note: the below information is offered for illustration purposes only and is not to be taken as legal advice. Please consult an attorney before drafting legal documents such as wills, trusts, and powers of attorney.
So what are some things you can expect to see in a will?
Testator Information and Declarations
Like the preface of a book, the introductory paragraphs of a will typically include information about the person the will is being drafted for. To start, the Testator’s full name and place of domicile is stated to minimize confusion in the event the testator dies and the will is put into effect. John H. Smith of Missoula, Montana doesn’t want his assets to be distributed according to the will of John S. Smith of Spokane, WA for example.
After identifying the testator, information on the testator’s spouse and children (if applicable) and, on occasion, information about other key relationships (for example: a niece or nephew that the testator was close to and plans to name as a beneficiary) is given. If you dust off your estate planning binder and take a look, it might read something like this:
I, Abraham Lincoln, currently domiciled in the District of Columbia, declare this to be my Last Will and Testament
My immediate family consists of myself, my spouse, Mary Lincoln, and the following children:
Robert Todd Lincoln, Son
Edward Baker Lincoln, Son
William Wallace Lincoln, Son
Thomas “Tad” Lincoln, Son
Sometimes, for one reason or another, a parent may choose to disinherit a child. That is, purposefully exclude them from receiving any assets in the event of the parent’s death. In these circumstances, that intention is often clearly articulated up front. For example:
I am choosing to leave no assets to my son, William Wallace Lincoln, and have intentionally excluded him from the provisions set forth below.
It’s worth consulting an attorney any time you have a unique situation arise, such as choosing to disinherit a child.
Naming the Executor
Next comes arguably the Testator’s biggest decision within the estate plan: naming the executor/personal representative. In Abe’s case, for example, he might name Mary Lincoln as his personal representative and include a contingent executor in case Mary predeceases him. In practice, this portion of a will might be fraught with legalese, but to continue Abe’s fictional example, it might include something similar to the following:
I appoint my spouse, Mary Lincoln, as the sole Executor of this will, but if Mary predeceases me or should refuse or otherwise unable to act as my Executor, then I appoint my friend, Joshua Fry Speed as the alternate Executor of this will.
As defined above, the Executor or Personal Representative of a will is the quarterback of the probate process, as they are responsible for ensuring the testator’s wishes are carried to fruition. It goes without saying that the person named should be someone the testator has tremendous trust in.
While it’s common for the Executor to also be one of the beneficiaries of the will, that does not have to be the case. A parent that has three kids who refuse to agree may wish to name a person who is independent from the kids as the Executor of their will, for example. It’s also worth noting that your Executor serves a different role from your Power of Attorney and at different times, as a power of attorney is only valid until death, whereas an Executor’s role is only applicable after death.
Payment of Expenses and Debts
Before assets can be distributed to beneficiaries, certain expenses must be paid, such as taxes and funeral expenses. The Executor has a right to reasonable compensation for their role in administering the estate. Additionally, debts, such as outstanding credit cards, mortgages and other loans are to be paid in full prior to distributing remaining assets. The sale of assets, such as houses or cars, to pay off corresponding debts is often the most time-intensive part of settling an estate.
Special Bequests
It is common for a person to leave the bulk of their assets to their family while having certain charitable goals they’d like to contribute to as well. If the testator wishes to leave a specific gift to the local Humane Society, for example, they can do so by outlining a special bequest of a certain dollar amount to be granted prior to dividing up the estate.
For example, a Testator might have $500,000 in total assets after paying expenses and choose to grant a special bequest in the amount of $50,000, which leaves $450,000 to be divided amongst his or her children.
Because most estates include appreciating assets such as investments, granting a special bequest allows the testator to donate a flat dollar amount to their favorite cause(s) while leaving future growth of their assets to their kids or other beneficiaries.
Disposition of the Residual Estate
Finally, what’s left in the estate after taxes and bequests is to be directed as the testator desires. This is often where the bulk of the deceased person’s assets are split amongst their preferred beneficiaries. In our fictional Abe Lincoln example, Mary would likely be Abe’s primary beneficiary but in the event she predeceases Abe the three children who were not disinherited (Robert, Edward, and William) might be equal contingent beneficiaries.
Other Common Components of a Will
It’s important to note that every will is different and, while there are a number of components that are fairly common, wills (and other estate documents) are not copy-and-paste documents that should be drafted without careful consideration and the advice of an attorney or other resource.
Here are a few other provisions you might see when reviewing a will:
Guardianship for Minor Children
If you’re a parent with minor children at the time of drafting your will, you’ll need to consider the implications your death for them. Who is going to be their legal guardian in your place?
Custodian of Assets FBO Minor Children
Additionally, those same minor children might stand to inherit assets from your estate but, given that they’re not yet adults, they’ll need somebody to manage those assets on their behalf until they are old enough to take custody of them. While this can be the same person as the guardian above, it doesn’t have to be.
Testamentary Trusts
A testamentary trust is a specific type of trust that does not come into existence until the death of the testator, hence why it is included in the testator’s will. Testamentary trusts can serve a number of different purposes. One common type is a credit shelter trust (CST, also known as a bypass trust or an AB trust), which helps married couples in certain scenarios get maximum benefit of their estate tax exemption.
Another reason for a testamentary trust might be for the distribution of assets to minor heirs. You may not want, for example, your son or daughter to inherit all your assets as soon as they turn 18. A trust can be used to set restrictions on the distribution of assets. For more on trusts, take a look at this article.
Note: Sometimes, people choose to include a letter of instruction to go alongside their will. This is a non-legally binding document that serves as a personal guide to the executor understand your wishes without all the legalese. It can also discuss considerations that are not addressed in the will, such as preferred funeral and burial arrangements.
