For many people, the first thing they think of when they hear the words “estate plan” is a will. And for good reason, as it is the cornerstone of any estate plan. But do you know what provisions should be included in a will and what are best to leave out? The answers to those questions may not be obvious.
Understanding the Basics
Typically, a will begins with an introductory clause, identifying yourself along with where you reside (city, state, county, etc.). It also should state that this is your official will and replaces any previous wills.
After the introductory clause, a will generally explains how your debts and funeral expenses are to be paid. Years ago, funeral expenses were often paid out of the share of assets going to an individual’s children, instead of the amount passing to his or her spouse under the unlimited marital deduction. However, now that the inflation-adjusted federal gift and estate tax exemption has increased to $11.7 million for 2021, this may not be as critical as before.
A will also may be used to name a guardian for minor children. To be extra cautious, name a backup in case your initial choice is unable or unwilling to serve as guardian or predeceases you.
Making Specific Bequests
One of the major sections of your will — and the one that usually requires the most introspection — divides up your remaining assets. Outside of your residuary estate, you will likely want to make specific bequests of tangible personal property to designated beneficiaries.
If you are using a trust to transfer property, make sure you identify the property that remains outside the trust, such as furniture and electronic devices. Typically, these items are not suitable for inclusion in a trust. If your estate includes real estate, include detailed information about each property and identify the specific beneficiaries.
Finally, most wills contain a residuary clause. As a result, assets that are not otherwise accounted for go to the named beneficiaries.
Addressing Estate Taxes
The next section of the will may address estate taxes. Remember that this is not necessarily limited to federal estate tax; it also can apply to state death taxes. You might arrange to have any estate taxes paid out of the residuary estate that remains after assets have been allocated to your spouse.
Naming an Executor
Toward the end of the will, the executor is named. This is usually a relative or professional who is responsible for administering the will. Of course, the executor should be a reputable person whom you trust. In addition, include a successor executor if the first choice is unable to perform these duties. Frequently, a professional is used in this backup capacity.
Seek Professional Assistance
Regardless of your age, health, and net worth, if you want to have a say in what happens to your children and your wealth after you are gone, you need a will. Contact us for assistance with tax-saving estate strategies and contact your attorney to help you draft your will.