What is a Will and Why Do I Need One?

by ACTEC Fellows Jean Gordon Carter and Elizabeth K. Arias

Experts in estate planning answer questions families often ask about Wills, associated documents, beneficiaries and e-wills. Topics include:

• How a Will helps with the transfer of assets after death;
• What a Will does not do;
• How do you create a Will; and
• Can you create a Will online, e-will or electronic Will?

transcript

Hello, I’m Jean Carter an ACTEC Fellow from Raleigh, North Carolina and I have with me my friend Liz Arias, also an ACTEC Fellow from Raleigh, North Carolina, and we’re going to spend a few minutes talking about “What is a Will and Why Do You Need One?” Liz, what is a Will?

A Will is a document that a person prepares in which they set out how they want their assets to pass when they die.

And what does a Will do?

Well, a Will will act to govern the transfer of those documents when the person dies. So just because you sign a Will does not mean you are giving up those assets on the day you sign the document. Instead, the Will will take effect when the person dies and in it, the Will will state how certain assets are passed and who the beneficiaries are; whether the beneficiaries are individuals, family members, could be a spouse, it could be more distant family members, it could be charities.

Well Liz, what does a Will not do?

Excellent question. It is very important for people who are considering preparing Wills to understand what a Will does not do. A Will only governs disposition of assets that a person owns in his or her individual name. In other words, assets that are not owned jointly, and a Will also does not govern disposition of assets that are governed by a beneficiary designation or other designation by contract that establishes where those assets would go at death. So, for example, some of the most commonly owned assets are principal residences, houses, and then items like life insurance or a retirement plan. A person might have a 401k at work. When you fill out a beneficiary designation that indicates where you want the proceeds of a life insurance policy to go or if you indicate who you want to receive your 401k when you die, that designation will trump your Will. So if your Will says “I leave everything to my spouse,” but you filled out a 401k beneficiary designation at work that leaves everything to your children, your children and not your spouse will receive the 401k benefits and that’s because a Will is trumped by that beneficiary designation. Likewise, if you have a bank account and you have what’s called a “payable-on-death” or a “transfer-on-death” designation that you set up with the bank, that designation will trump whatever you say in your Will. So, it is very important to understand what assets you own, how they’re owned, and which of those assets will pass under the Will versus by rights of survivorship or some other designation that you have made.

Well, what happens then if I don’t have a Will?

If you don’t have a Will, then whatever assets you own when you die will pass under a set of laws that are set out in the state in which you live, and those laws differ from state to state. Not every state provides for the same set of rules governing who the beneficiaries are that will inherit your assets. In North Carolina for example, many people believe that if you pass away and you’re married your spouse will receive a hundred percent of what you own, but that is not true. In North Carolina, a spouse will receive anywhere from one-third to one-half of the person’s assets and if there are children, children might receive the rest, or if there are parents, the spouse might end up having to split the assets with the person who passed away, with that person’s parents, which often produces an unintended result.

I can imagine very much, so you’ve convinced us. We need Wills. Now, how do we go about doing one?

Wills can and probably are best prepared by attorneys, but that is not the only option. For example, in many states, in North Carolina is an example, you can handwrite a Will and you could say in that Will “upon my death I want my assets to pass…” and then you could list your beneficiaries. Now, in North Carolina for that to be effective it must be handwritten and then signed by the person writing the Will. But you can also go online. There are legal providers that will offer Will services. Again, you want to be careful that if you are trying to do this yourself that you carefully research and understand what the rules are for execution of a Will in your state because every state has different rules. In North Carolina for example, your Will has to be witnessed, you need two witnesses, and there are very specific rules about those witnesses being present when you sign the document in certain representations that you make to those witnesses at the time you sign your document. In addition, is generally a good idea for your Will to be what’s called “self-proving,” which means that your Will can be probated at death without having to go find those witnesses and that usually involves the Will be notarized.

And I can’t just go online and type my Will online for myself and just sign it online?

Not in North Carolina. There is legislation pending in a variety of jurisdictions that would at least introduce this concept of, I guess, what you would call an e-will, an electronic Will, but that is not the law yet in North Carolina nor is it in many states in and around the country.

That’s fair, thank you. I think you’ve convinced us. We all need a Will. Thank you, Liz.