When I tell people that I do estate planning, the natural follow-up question is, "Oh, is that like writing wills?" Many people have that vague idea that estate planning means wills, but very few people know exactly what a will can do. Oh, everybody knows the basics: a will tells your kids what to do with your stuff when you die. But a will does much more than that. Here's a few things you can do with your will.
- Give to charity. If you decide to create a will, you have taken control over who will inherit your stuff. You can give money to whomever you wish in your will. Without a will, your property follows a predefined chain of family members with the potential that the state becomes the recipient of the inheritance you left behind. Since you get full control over who inherits in your will, you can choose a charity or charities to distribute assets to. You might give money to your alma mater or to your local high school or church. You might donate to the Red Cross or the Luke Society. The options are as many as the number of non-profit organizations.
- Set up a trust. A testamentary trust is created within your will and therefore goes into effect after you die. You can place some or all of your property into a testamentary trust and can use the trust to protect assets from the creditors or estranged spouses of your children. A trust is also effective to protect the inheritance of a minor child or an heir with special needs who probably should not receive a large amount of money or property outright. You can appoint a trustee and set conditions on distributions just like in any other trust.
- Appoint a Guardian. Along with creating a trust to protect your young kids' inheritance, you can also appoint the individual(s) who you want to care for your kids if you should pass away before they turn 18. You can decide who should take over if your first choice can't or won't act as guardian(s).
- Appoint an Executor. In your will, it is always a good idea to choose who you want to manage the distribution of your property after your death. If you don't choose someone, the court system will have to choose one for you. In addition, you can waive the requirement that your executor be bonded (which is kind of like insurance against the executor's bad actions); this might not be waived if you don't choose to appoint someone, so it's a good idea to make sure a waiver is included if you don't want your executor to have to spend the money. Finally, you can approve or set an amount which will be paid to your executor as compensation for managing your estate during the probate process.
- Personal Property Memorandum. A personal property memorandum clause in your will allows you to specify who will receive certain specific pieces of tangible personal property in a separate document from the will itself. The separate document can be revised or eliminated without having to change your will or create a new will. This memorandum only covers tangible property; land and cash, stocks, or other intangible personal property cannot be given away by using this document.
As you can see, a will is much more than a list of your heirs and instructions about who should get what. Along with these common terms, you can give your executor, trustee, and guardian specific powers. You can disinherit a child. You can take special steps to try to avoid estate taxes.
Without a will, you get no options. The law pre-determines how your estate passes. Isn't the alternative a better choice?
