When There’s a Will, There’s a Way

 

The phrase “when there’s a will, there’s a way” is generally used to describe a personal trait that some people call “willpower” or “grit.” People with grit have a strong determination to do something, often against great odds. They keep on going and “push through” against obstacles big and small and, in the case of personal finance, temptations to spend money.

 

“When there’s a will, there’s a way” also makes a great title for a post about wills. Below are five important things to know about preparing a will and what happens when people lack one:

Purpose of a Will- A will is a written document that sets forth directions for the disposition of property when someone dies. This includes the naming of a personal representative (executor) to manage the estate distribution process and a guardian to provide care for minor children. The laws of each state specify requirements for a legal will (e.g., number of witnesses and notarization and who qualifies to serve as an executor). For example, in Florida, executors must be a state resident over age 18 or a blood (or adopted) relative. A friend living in New Jersey would not qualify.

 

Dying Without a Will- When people die without a will, state intestacy laws determine to whom their assets pass and when they pass. Without a will, an estate can be tied up in probate court, possibly for years, and there will likely be higher estate administrative costs (e.g., bonding for an appointed personal representative). Probate is the court-supervised process of gathering data about a deceased person’s assets, paying off creditors, and distributing assets to named beneficiaries.

 

Ambulatory Document- A will is ambulatory, i.e., it can be changed throughout the creator’s lifetime. It only becomes final when the creator dies. There are three essential sections: who the creator is, what assets the creator has, and who the creator’s assets will go to (e.g., family, friends, charity). Even if not required by state law, wills should be notarized so they are “self-proving” and heirs don’t have to scramble to locate the witnesses, often decades after a will is signed.

 

Excluded Assets- A will does not distribute assets that have named beneficiaries. This includes beneficiary designations on life insurance policies, annuities, and retirement savings accounts such as 401(k)s and IRAs as well as payable on death (PoD) designations on bank accounts, transfer on death (ToD) designations on investments, and assets with a joint tenancy with right of survivorship (JTWROS) title. When a will and title conflict, the title to an asset takes precedence.

 

Personal Representative- A named personal representative (i.e., an executor in a will) can be an individual (e.g., family member or friend) or legal or financial services industry fiduciary (e.g., attorney or bank trust department), if qualified under state law. When there is no will, or a named executor is unwilling or unable to serve, a known or unknown (to the deceased) personal representative will be named. As noted above, this can increase the cost and time frame for estate settlement. An upside, however, is that there may be greater court supervision. This can be a plus for people who have “nobody left” or nobody they can trust to manage their assets.