A quality estate plan generally involves the use of three documents. These include a Power of Attorney, a Living Will and a Will. At this time, the use of Wills will be discussed.
When people think of a Will, they generally think of a document which has only one purpose, that being the distribution of their assets after death. However, a Will has a number of other important purposes.
One such purpose is the appointment of a guardian for your minor children. A guardian is the person who will take custody of your children after your death. If you do not appoint a guardian in your Will, the local court will decide who will raise your minor children if your surviving relatives cannot agree.
Another important purpose of a Will is to establish a trust detailing when your children will receive the inheritance you are providing to them, and how it may be used.
Unfortunately, many people are intimidated by the mere mention of a trust because they believe it is something which is quite complicated. However, a Trust is a simple tool which involves nothing more than placing terms in your Will which detail when your children will receive, and how they may use, the inheritance you are providing to them.
Most frequently, these type of trusts indicate that a child’s inheritance can only be used for educational or medical expense purposes until the child attains a certain age. Often, an age such as 21 years is chosen.
Furthermore, when the child attains the indicated age, these type of Trusts often indicate that the remaining monies are to be distributed to the child in increments. The most common increments are one-third of the Trust balance being paid on each of the child’s 21st, 25th, and 30th birthdays.
The above are only a few examples of trust terms. In fact, almost any term or restriction can be incorporated into your trust. Furthermore, a trust is not limited to only being used for children. It can also be used for disabled beneficiaries or for adult beneficiaries who are likely to spend their inheritance irresponsibly.
In deciding how to distribute your assets in your Will, keep in mind that you have complete discretion in deciding who will receive your assets upon death. The only limitation is that you cannot entirely disinherit your spouse. Otherwise, there is no limitation.
For example, you can theoretically give your entire estate to an unrelated individual or charity, even if you have surviving children.
A common misconception is that the state will receive all of your assets if you do not prepare a Will. In fact, this is incorrect. Rather, Pennsylvania has enacted an intestacy law. This law instructs how your estate is to be distributed if you do not have a Will. Generally, if you do not have a Will, Pennsylvania’s intestacy law provides that your assets shall be distributed to certain of your closest surviving relatives.
However, even though Pennsylvania does have an intestacy law it is still wise to prepare a Will since the intestacy law does not always instruct as you would intend. Furthermore, even if the law does currently instruct as you intend, the law could always change in the future.
With respect to the preparation of a Will, many people believe that they must list all of their assets in their Will. These people see the preparation of a Will as an impossible task, since their assets are constantly changing. However, this concern is unfounded as you do not normally need to list your assets in your Will.
Instead, most people simply indicate that whatever value they do own at death, after the payment of all of their debts and expenses, shall pass to various named individuals on a fractional or percentage basis. For this reason, the preparation of a Will should not be seen as an intimidating task.