A will is simple a piece of paper that says who gets what when you die. But it's also a legal document, which is where the trouble can begin. When you're dealing with a will, you're dealing with the courts. Keep reading to find out why?
Depending on how complicated your affairs are:
a. you can have a lawyer draw one up;
b. buy the form at a stationery store and fill in the blanks, or
c. you can get a computer program to draw one up for you.
When you sign it, you will need to have two or three people witness it as well.
When you want to make changes to the will, you simply draw up what is called a codicil, which is an additional paper enumerating your changes and follow the same procedure with the signatures and witnesses as you did in your will.
A holographic will is where you can draw up your own will on a piece of paper. Make sure the paper does not have any other writing on it and that the entire thing is written with your handwriting and is signed and dated by you. If you make a mistake, don't cross it out. Start over. Anything crossed out is considered an interlineation, making the will null and void.
Do not have anyone witness a holographic will because it will make it null and void. If you want to change a holographic will, it is better to just redo the entire thing.
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For estate tax purposes all the property will have to be valued (appraised), the final tax returns compiled, and if any money is owed to the IRS, the executor must make sure that it is paid or the money is set aside before any assets are distributed to the people in the will. In many states the executor gets a set fee for having done all these tasks, or, depending on where you live, you may just decide to specify a fee in the will.
Preparing a will is relatively easy, where it can get complicated is after you have died. All your will says is where you want your property to go. It does not get it there very easily.
After your death your will has to go through the court system. Usually the executor has a lawyer handle this. Once the will gets to the court, two things happen.
1. A judge has to authenticate the will, to make sure it is valid. This is called Probate. After the judge probates the will, he or she will then sign a court order transferring title to the property covered in the will to the people who are intended to receive it, as reflected in the will.
Depending on which state you live in this could be a nightmare:
• The process can take anywhere from six months to two years or more, while ownership of the property remains in probate limbo.
• In the state of California, this process does not come cheap as there are statutory probate fees--fees, that is, set by law. These
are the first fees that have to be paid from any estate.
The court would total the value of the estate and then charge a fixed-by-law percentage of that amount for these probate fees.
The probate fees are based on the fair market value of the house at the time of death, which means "what the value of the house is on the open market." Not the based on the equity of the home (market value minus the outstanding loans).
Probating a will takes time and money, no matter what state you're in.
2. Wills can be contested, which means that anyone who thinks he or she should have something in the will that the deceased left to someone else has the right to come to the court and ask for it. Then the judge has to decide.
To save on agony and expense some of this can be avoided with a revocable living trust.
A revocable living trust is a set of documents stating who controls your assets while you are alive and what will happen to them when you are gone.
How is a Revocable Living Trust different from a Will?
While a will says where you want your assets to go after your death, with a revocable living trust you take the steps while you are alive to sign the title of your property over to the trust for your own use and benefit while you are alive. You also specify in the trust where you want each piece of property to go when you are gone. The property is held in the name of the trust -- for you, while you are alive, and for your beneficiaries, after you're gone. When you die the trust passes your property directly to the people you want to have it. The trust lives on even after you're gone, carrying out your wishes.
Anytime you want to, you can amend the trust, so you can always change your mind about who gets what. Most important, with a trust, there is no probate. The courts are not involved in the transfer of your estate.
Think of a trust as a suitcase, into which you put the title to your house, your stocks, your other investments. With each item you have specified who will own it after you die. You carry the suitcase while you are alive--you're perfectly free to put new things into it or take anything out--and then it gets handed directly to your beneficiaries upon your death, at which time they can open it and take out whatever is in it.
In many, many cases--especially in states with statutory probate fees--trusts are far superior to wills. With a trust you save time and you avoid probate fees and legal fees. No courts. No attorneys.
If you own property or other assets, have children, or care about what happens to the people you love after you're gone, please look into a trust. When? As soon as possible. There is a bit of paperwork involved in switching assets into a trust, so the sooner you've set one up, the easier it will be to accumulate assets in the name of the trust.
The above information was taken from the book "The 9 Steps to Financial Freedom" by Suze Orman.
I am not providing financial or legal advice and strongly recommend that you hire a reputable Estate Attorney and Certified Public Accountant well versed in this area of expertise to assist you. Please check out the Resources tab for recommendations or contact me for additional assistance in locating someone in your area.
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