Estate planning is one of the most important steps any person can take to make sure that their final property and health care wishes are honored, and that loved ones are provided for in their absence. Though often overlooked or put off in favor of more immediate concerns, a comprehensive estate plan can resolve a number of legal questions that arise whenever anyone dies: What is the state of their financial affairs? What real and personal property do they own? Who gets what? Does a personal guardian need to be appointed to care for minor children? How much tax will need to be paid in order to transfer property ownership? What funeral arrangements are appropriate?

A carefully implemented estate plan can help to—

• create and conserve assets during life
• minimize death taxes and estate settlement costs
• assure that cash is available to pay unavoidable death taxes and costs
• provide an orderly distribution of assets that meets the estate owner's objectives and intentions
• provide peace of mind and family harmony.
  

What is an "Estate"?
Your "estate" consists of all property owned by you at the time of your death, including:

• Real estate
• Bank accounts
• Stocks and other securities
• Life insurance policies
• Personal property such as automobiles, jewelry, and artwork. 

How Can an Estate Plan Help?
Regardless of your age, or the size and complexity of your estate, an estate plan can accomplish the following:

• Identify the family members and other loved ones that you wish to receive your property after your death.
• Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as possible.
• Minimize the amount of taxes that will need to be paid in order for your property to pass to others after your death.
• Avoid the time and costs associated with the probate process by utilizing estate planning devices like living trusts and "payable on death" bank accounts.
• Dictate the kinds of life-prolonging medical care you wish to receive should you be unable to make your wishes known when the time comes.
• Set forth the kind of funeral arrangements you would like, and how related expenses are to be paid.

Wills and Intestacy

• A will can help to minimize or avoid estate costs—taxes, administration expenses and shrinkage of assets.
• A will may nominate a guardian for minor dependent children if there is no surviving parent.
• Specific assets—e.g., family heirlooms—can be bequeathed to an appropriate heir.
• The testator can make a bequest to charity.
• The testator can nominate an executor or personal representative to carry out the terms of his will during the probate process.
• The executor can be granted specific powers in the will that he or she would not otherwise have under state law, e.g., the power to continue operating the decedent's business.
• A will provides an opportunity to make the best use of the estate tax credit and the marital deduction. Click here for information on estate tax credits (then click the Back button to return here).
• A will may be used to provide income for the care of a mentally or physically handicapped child, parent or spouse.
• A will can provide for the close-in-time deaths of spouses, which may affect distribution of assets.
• The will can describe how estate settlement costs are to be paid, so they are not charged against particular heirs or bequests.

Testamentary Capacity
"Testamentary capacity" simply means that a person must be—

• Sound mind The testator must be of sound mind at the time the will is executed. If the testator subsequently becomes of unsound mind, the validity of a previously made will is not affected. Whether a person was of sound mind when a will was signed is a factual question that a court may ultimately have to determine.
• Legal age Most states set 18 as the minimum age to make a valid will. This age is often the same as the age of majority, but a few states are exceptions.

• an accepted form under state law,
• pronounced during the testator's final illness,
• • reduced promptly to writing by the witnesses, and
• • filed promptly with the probate court.
  

Obviously, it's not wise to wait this long and hope that all the witnesses hear the same thing.

A will entirely in the testator's own handwriting and with no attesting witnesses (called a holographic will) may also be accepted as valid in some states. However, the testator's handwriting may be illegible, or his intentions may be expressed in a confusing or inconsistent manner.

State law usually requires two or three adult witnesses to witness the execution of the will. If a will is contested in court, witnesses may be called upon to describe the testator's state of mind and the actual circumstances surrounding the execution of the will.

Revocation of a Will
A will can be revoked by the intentional physical destruction of the will or by the execution of a subsequent will. However, the testator must be of sound mind at the time either of these events occurs to accomplish the revocation.

The law "forces" a revocation. For example, marriage revokes a prior will of either spouse in some states. In some states, divorce, annulment or the birth of a child also revokes a prior will. Divorce may also revoke provisions in the will in favor of the ex-spouse without revoking the entire will.

Codicils: Amendments to a Will
A will may be amended by a legal document called a codicil usually when only minor changes in the original will are being made. Codicils must comply with all the legal formalities of wills including the "soundness of mind" rule. It's a good idea to review and update a will when—

• the testator moves to a new state
• the testator gets married or divorced
• a child is born or adopted
• the testator experiences a major change in financial circumstances or is affected by a change in law
• the testator wishes to change beneficiaries, executor, guardian(s) or trustee(s).
  

State Law Restrictions on Disposition
State law imposes some restrictions upon the testator's disposition of his or her estate assets. For example, the surviving spouse can generally "elect against the will" if the testator leaves the spouse less than what she would have received if he had died intestate (without a will).
Similarly, children who are omitted from the will (called pretermitted children) are entitled to a child's intestate share in some states. This is more common in the case of children born after the will was executed.

Will Contest by Heirs
Heirs may challenge the validity of a will by initiating a will contest in probate court on a variety of grounds:

• the testator was under duress, undue influence or fraud at the time of execution
• the testator was of unsound mind or below the minimum legal age
• the testator's signature was forged
• the will was not executed in accordance with required legal formalities
• the testator revoked the will.
  

What Is Intestacy?
If a person failed to execute a will or died without a valid will, he or she is said to have died intestate, and his or her property will be distributed under the intestate succession statutes of the state. These statutes do not take into consideration the decedent's unique personal situation, and the distribution is unlikely to be in total accord with what the decedent would have wished.

The intestacy statutes only take into consideration family relationships; they do not take into account such factors as taxes, administration costs, or estate shrinkage.

The Price of Dying Intestate
Suppose a husband has a wife and two minor children. If he were to die without a will, he would probably be shocked to learn that, in many states, his wife would only receive one-third of his probate property. The other two-thirds would go to the children under the intestacy laws.

Suppose a widow leaves two children, one healthy child and one with a physical handicap. A will could recognize the greater needs of the handicapped child, but the intestacy laws will treat the children equally.

Aunt Louise would like a brooch to go to her favorite niece. She can accomplish this by will, but the intestacy laws would not recognize Aunt Louise’s intentions for specific assets.

The will allows the decedent to nominate an executor, but in the absence of a will, the court will appoint an administrator. This may or may not be someone the decedent would have named.

Intestacy can make estate administration more difficult, and that could translate into higher fees for the administrator of the estate and higher legal fees. The administrator will have the minimum powers granted by law, not the broader powers that could be extended by will. So, the administrator generally has less flexibility in dealing with estate assets, and this may result in loss of value or sale of estate assets at a liquidation price.

Special Rules for Children
An adopted child will normally take a child's full intestate share from the estates of both the adoptive parents and, in some states, from the estates of the natural (biological) parents.

A child born after the death of a parent will also take a child's full intestate share from the estate of the deceased parent.

Illegitimate children in most states will take a child's full intestate share from the mother's estate, but not the father's estate unless

• the father has acknowledged the child as his,
• a court has ruled him to be the father, or
• the father married the mother after the child was born.
  

Escheat to State
If the decedent leaves no heirs, as defined by the intestacy statutes, the decedent's assets (after payment of debts and expenses) pass ("escheat") to the state. The states allow a grace period for heirs to "turn up" and challenge the escheat.