Understanding the contents of a will
You probably don’t have to be told about the need for a will. It’s been said over and over again. But do you know what provisions should be included and what’s best to leave out? The answers to those questions may not be as obvious.
Basic provisions
Typically, a will begins with an introductory clause, identifying yourself along with where you reside (city, state, county, etc.). It should also 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. In the past, funeral expenses were often paid out of the share of assets going to your children, instead of the amount passing to your spouse under the unlimited marital deduction. However, now that the inflation-adjusted federal gift and estate tax exemption has increased to $11.18 million for 2018, this may not be as critical as before. The provisions for repaying debt generally reflect applicable state laws. Consult with your estate planning advisor or attorney concerning your options.
Don’t include specific instructions for funeral arrangements. It’s likely that your will won’t be accessed in time. Spell out your wishes in a letter of instructions, which is an informal letter to your family.
A will may also be used to name a guardian for minor children. To be on the safe side, name a back-up in case your initial choice is unable or unwilling to serve as guardian or predeceases you.
Addressing estate taxes
The next section of the will may address estate taxes. Remember that this isn’t necessarily limited to federal estate tax; it can also 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.
Furthermore, if you’re using a testamentary trust, it may be required to pay any resulting estate taxes. Coordinate this with other aspects of your will. You can’t anticipate every possible scenario, so rely on your advisor or attorney for guidance.
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’ll likely want to make specific bequests of tangible personal property to designated beneficiaries. For example, you might leave a family heirloom to a favorite niece of nephew.
When making bequests, be specific as possible. Don’t simply refer to jewelry or other items without describing them in detail, especially if you own multiple rings or watches or the like. This can avoid potential conflicts after you’re gone.
If you’re 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 won’t be suitable for inclusion in a trust.
If your estate includes real estate, include detailed information about the property and identify the specific beneficiaries. Conversely, if you own property jointly with rights of survivorship, the real estate passes automatically to the surviving owner.
Once you’ve covered real estate and other tangible property, you can move on to intangible property, such as cash and securities. Again, you may handle these items through specific bequests where you describe the property the best you can. Include cash in your home or other places, such as a safe deposit box.
Don’t forget about money you’re owed. Assign beneficiaries for items that don’t fit neatly into any other specific bequests.
Finally, most wills contain a residuary clause. As a result, assets