A will is a legal document that contains a person’s instructions of how to distribute his/her property after he/she dies.
The following types of wills exist:
With a holographic will, the testator must write and sign the document by hand. Execution of a holographic will does not require the presence of any witnesses. The probate court sends “proof of holographic instrument” documentation to persons who can verify the decedent’s handwriting.
A nuncupative will is an oral will. It requires witnesses to be present during the decedent’s declaration and to sign an affidavit confirming the decedent’s last wishes.
A joint will is a single document executed by two or more persons to communicate one estate plan for all of the parties represented.
A reciprocal will normally consists of two individual documents appointing each testator as the other’s beneficiary. Professionals in the field do not recommend joint or reciprocal wills due to ambiguity concerns.
Legal Requirements of a Will
The law usually requires the following for a person to make a will:
- A person of sound mind who is 18 years or older
- Knowledge of asset ownership and distribution
- Recognition of relatives and/or friends by their names
- The date
- The document being written
- The testator’s signature
- A minimum of two witnesses to attest it
- A self-proving provision
*Please note that these requirements may differ depending on the state.
Will Revocation and Modification
A codicil is the legal document you use to modify a will. The law holds this document to the same standards as it does a will. For example, both the testator and the witnesses must sign the codicil. A codicil does not replace the original will, and one must always keep it in the same location as the original will. A misplaced or lost codicil will result in the distribution of assets per the original will’s provisions. Also, professionals in the field advise against handwritten changes on the original will since these can cause revocation of the will.
One revokes a will by destroying it, defacing it, or executing a new will. The new will must state that the testator has revoked all prior wills. Also, one should never revoke a will prior to executing a new will.
A disclaimer is a designated beneficiary’s unqualified refusal to accept the transfer of an inheritance or a lifetime gift. A disclaimer must meet the following requirements, per the IRS code, to qualify:
- Must be an irrevocable and unqualified refusal
- Must be in writing and signed by the disclaimant
- Must be delivered to the transferor or legal representative no later than nine months after the later of the transfer date (date of death) or the date the disclaimant reaches 21 years of age
- Must be made prior to the disclaimant’s acceptance of the inheritance or lifetime gift
- Must transfer property to someone other than the disclaimant
Please note that state law disclaimer requirements may render federal law disclaimer requirements invalid or unqualified. Disclaimers exist to minimize estate, gift, and generation skipping tax liabilities.
Anyone can contest a will for any reason. Therefore, avoiding will contest proves quite difficult. People contest wills to destroy the validity of these documents.
The following reasons often lie at the root of will contest:
- Improper execution
- Testator’s incompetence
- The will being signed under duress
- A disinherited relative
- Family dispute
The best way to avoid will contest is to have an attorney draft and execute the will. An attorney will ensure proper execution, evaluate the testator’s competency, and prevent fraud.
What Is a Fiduciary?
A fiduciary is a person or institution appointed to act in the best interests of another person. The following types of fiduciaries exist:
A trustee is appointed to act in the best interest of the trust beneficiaries. An executor/administrator is appointed to act in the best interest of the estate beneficiaries. A guardian is appointed to act in the best interest of his/her ward.
Duties of a Fiduciary
The fiduciary must do the following:
- Always commit to act in the beneficiary’s best interest
- Not delegate fiduciary responsibilities
- Provide full disclosure of all transactions to the beneficiary
- Preserve and protect investments
- Recommend suitable investments
- Make assets productive
- Avoid self-deal
- Provide an unbiased view toward income and remainder beneficiaries
Breach of Fiduciary Duty
A fiduciary that breaches duty may be held personally liable for his/her actions and any losses that the beneficiaries incur. Common breaches of duty include the following:
- Personal use of assets
- Failure to make assets productive
- Failure to invest assets
- Failure to disclose conflicts of interest between the fiduciary and beneficiary
References Used In This Article
- Bost, JOHN C. (2006) “Estate Planning and Taxation”. Kendall/Hunt Publishing Company.
- Leimber, Stephan R. et al. “The Tools and Techniques of Estate Planning”. National Underwriter, Eleventh Edition