In my blog, I am going to try to cover some common questions many people have regarding estate planning and other areas of the law. For this post, I decided to start with the most basic and most well-known estate planning document…the will. I hope this post answers some questions you may have so that you can make better informed decisions regarding your own estate plan.
In simple terms, a will is a legal document that says what you want to happen to your “stuff” when you die. Your “stuff” may include your home, your cars, vacation property, personal property (such as clothing, jewelry, furniture etc.), boats, land and any other property which you own at death. In addition to physical possessions, your “stuff” may include financial assets such as stocks, bonds or retirement plans for which no separate beneficiary designation statement or form exists. In the absence of a separate agreement between you and the financial institution, these financial assets will be distributed along with the rest of your “stuff” under the terms of your will.
Any adult may make a will to express their wishes. In the legal field, we use the term “Testator” to refer to the person who has made a will. In the case of married couples, both the husband and the wife must execute separate wills. Even though married couples often own most assets jointly, they must each decide how they would like their interest in the property to be distributed.
In addition to providing for the disposition of your “stuff” upon your death, a will can also nominate someone to act as the manager of your estate upon your death. The person named is known as your “Personal Representative” and they are responsible for carrying out the wishes expressed in your will. (You may have also heard this person referred to as the “Executor” but both Wisconsin and Minnesota use the term “Personal Representative”) Given the responsibility of this position, you should name someone you trust to accurately carry out your wishes to fill this role. Married people often name their spouse as their Personal Representative, with an alternate friend or relative named as a successor in case the spouse predeceases the testator.
For parents of minor children, your will can be used to nominate a “Guardian” for your children. The “Guardian” is the person legally responsible for raising your children in your absence. This is often a very important reason to execute a will. In the absence of a Guardian nominated in your will, the local court of jurisdiction would decide who would become the guardian of any minor children. The court would also appoint a “Property Guardian” or “Guardian of the Estate” to manage the inheritance of each minor child until they turn 18. This may or may not be the same person as the “Guardian” of the person of each child.
If you execute a Will, you may choose to name a “Guardian” of the person of your children, and a separate person to serve as “Guardian” or “Custodian” of the estate of each child. For instance, you may know someone who is great with children, but not as good at managing money. You might wish this person to raise your children for you, but not want them to manage the money left to the children under your Will. In this case, you would name one person to physically raise and educate your children and name them as the “Guardian of the Person” of each child and you could select a second person to serve as the “Guardian” or “Custodian” of the estate left to each child under the Uniform Transfer to Minors Act. The “Guardian of the Estate” would manage the money for your children until your children reach the “Age of Termination.” The Age of Termination, is a statutory age that varies by state to state, at which children are deemed old enough to receive their inheritance for a bequest received while they are a minor. In Minnesota and Wisconsin the Age of Termination is 21.
Another option is to set up a single family trust (sometimes called a “pot trust” because it pours all of your assets into one big “pot” to be used for the benefit of your children) within your will that receives the assets of your estate if both you and your spouse die simultaneously. This trust comes into existence, if and only if both you and your spouse die in a common accident, or within a very close period of time. You can then name a “Trustee” to manage the assets for the benefit of all your children, and you can also include terms explaining how you would like the trustee to manage the trust and/or distribute funds for your children’s benefit. In this case, you would want to pick a Trustee who is good with financial matters and who you trust to carry out the wishes expressed in your trust agreement, to provide for the health, education and welfare of your children. The trust will terminate and the Trustee will distribute the funds equally among your children after your youngest child reaches an age that you choose. The youngest possible age would be 18, when the youngest child is no longer a minor, but you may decide to choose a different age such as 21, 25, or even older. A trust provides the maximum flexibility to choose options and express your wishes for how you would like your children to be provided and cared for financially. This is only one example of the use of a trust within your will. There are many more ways to structure and use trusts within an estate plan, but they are beyond the scope of this discussion and will hopefully be covered in future posts.
As a reminder, this information is presented as a general overview, to help you understand some of the terms used in estate planning and the decisions that need to be made when you are considering making a will. For specific questions related to your estate, please contact me or another attorney so you can get specific advice tailored to your unique situation.