If you’re putting your affairs in order, then a will or a trust is the first item you should consider. Even if you don’t expect to leave an estate, a will can be very helpful in disposing of the few things you do own or dictating your burial wishes. At the very least, it avoids the prospect of letting the state make the decision. Larger estates or couples with children could benefit from a living trust.

How Wills Work
A will performs three primary tasks:

  • Name your executor
  • Distribute your property
  • Name a guardian for your child.

In addition, your will can set up a trust for your minor children so that they’ll continue to be provided for. You can also choose to include your burial wishes in the will to guide your survivor’s in ensuring that they’re met.

Wills can be written jointly or separately. Separate wills are considered preferable because it allows the surviving spouse flexibility after the first spouse dies. If you have a joint will, the surviving spouse is forced to abide by the terms of the original will, even if circumstances change later. Once written, wills don’t have to recorded. Instead, they will be entered into probate court to guide the executor and the courts after your death.

If you don’t have a will, the state decides who will inherit your property and assets. In most states, your spouse, children, or other next-of-kin will inherit. If you’re unmarried, your partner often won’t inherit anything. If no relative is found, the state will keep your property. If you have children, it’s very important that you have a will that names their guardian, otherwise the court may choose someone you wouldn’t approve of. Without a will, the surviving spouse isn’t guaranteed to be named the guardian.

A will can be modified or revoked during your life. It can also be contested in court after your death, but this is rare. Most of the time it involves the heirs of the very rich or famous arguing about the disposition of assets and the courts rarely invalidate wills in any case.

How Living Trusts Work
If you have children and/or a large estate, a living trust is probably preferable. They peform the same tasks as will, but they avoid probate court, which keeps the estate private and avoids estate taxes. When the trust is set up, you transfer all of your assets into them and then retain their use during your life. When you die, the assets automatically transfer to your beneficiaries for their use.

A living trust often includes a durable power of attorney, which grants the person you name the right to make financial decisions for you if you become incapacitated. Both living trusts and powers of attorney can be revoked during your life.

How to Make a Will or Living Trust
You can write a will yourself or hire a lawyer. If you have few assets and no children, then a simple will using a standard free will template or forms from Nolo Press should be sufficient. You’ll need to sign and date it in front of two witnesses, who will also need to sign it. Handwritten wills are legal in some states, but a formal will signed by witnesses is preferable.

You should hire a lawyer or use a legal service like Legalzoom, which prepares legal wills at very reasonable prices, if you have children or plan to disinherit someone. You can’t automatically exclude your surviving spouse, but you can exclude any children who were born before the will was written.

If you have children or a larger estate, a living trust will offer more protection. Trusts must be prepared by lawyers. You can usually set one up for about $2,000, but it may cost more if you have a complicated estate.

Where to Keep Your Will
Your will should be kept somewhere in your home where it’s easily accessible. Although you can keep a copy in a safe deposit box, your heirs won’t be able to access the box without it. You also shouldn’t keep it in a home safe because your heirs may not be able to access it. Instead, keep it in a labeling filing cabinet or box with your other vital documents.

In addition, you should give a copy to your executor. Discuss your wishes with the executor and your children’s guardian before naming them in the will or trust, and again after it’s complete to ensure that they understand them.

If you used a lawyer, your lawyer will usually keep a copy on file. If you survive to old age, your lawyer may die first or the will may be in deep storage, so don’t count on your heirs being able to quickly access that copy in the event of your death. It mainly serves to protect you if there’s a question about the will after your death.

Even if you don’t think you need a will, take the time to make up a simple one if you’re married, have assets, or have children. Tomorrow I’ll explain the Durable Power of Attorney for Health Care, also called an Advance Directive, which is next most important document you should have.

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