LAST WILL & TESTAMENTS
LAST WILL & TESTAMENTS
General Information on Last Wills & Testaments
Each state has formal requirements for preparing and executing a Will. Generally,
the testator must declare that the document that is being signed is the testator's
Will. The signature must be witnessed by a minimum of two or three witnesses,
who must also sign the Will in the presence of the other witnesses. Each
state has slightly different wording for the testator's and the witnesses'
Are There Other Types of Wills?
A Will that is handwritten by the testator and signed by the testator, but
has not been witnessed, is called a holographic Will. Few states recognize
holographic Wills and only where all statutory requirements have been followed.
Oral Wills, also called noncupative Wills, are only recognized in a few
states and only under compelling situations such as the impending death
of a soldier in wartime.
A self-proving Will is one that has been witnessed, executed with all the
formalities required by the state's laws, and also signed and witnessed in
the presence of a notary public. The benefit of a self-proving Will is that
it is not necessary to obtain statements from the witnesses at the time that
the Will is probated. A self-proving Will saves a great deal of time and
effort where it turns out that one or more witnesses cannot be located or
are themselves deceased.
Based upon its contents, a Will may be categorized as one of the following:
- a simple Will
- a tax-planned Will
- a pour-over Will
A simple Will leaves the entire estate to one or more named beneficiaries.
No portion of the estate is left in trust. A tax-planned Will generally disposes
of all or a portion of the estate to one or more testamentary trusts, and
not directly to the beneficiaries. The trusts are used to avoid or minimize
death taxes. A pour-over Will generally leaves assets to an inter vivos trust
- one that was created by the testator during their lifetime.
A living Will is not used to dispose of property after death, but rather
it is an expression of one's personal position on the administration of artificial
life support techniques and procedures. A living Will is needed when you
are no longer competent to make these decisions and become terminally ill
or permanently unconscious. A health care proxy gives another individual
the right to make these decisions for you. Living Wills and health care proxies
are often signed at the same time that a Will is executed.
Picking Your Executor
The same considerations that are important in choosing a trustee should be
used when deciding upon the executor of your estate. First and foremost,
you should choose an individual or institution that you trust. An executor
needs to gather assets, pay debts and expenses, and distribute assets to
beneficiaries. The executor does not need to invest assets other than on
a temporary basis but, on the other hand, a major role of the trustee is
to prudently invest the trust assets so as to be fair to all of the beneficiaries.
The role of an executor is limited in duration while a trustee might serve
for many generations.
Where to Keep Your Will
A Will should be kept in a safe place such as a bank safe deposit box or
fireproof safe at home where it can be easily located after your death.
. If the Will is kept in a safe deposit box, you must arrange for the executor
to have access to the box after your death. Some states put a freeze on
a safe deposit box at death, which makes it more difficult to retrieve
Reviewing an Estate Plan
There are a number of occasions that justify the review of the provisions
in your Will and your estate plan in general:
- when you get married or divorced
- the birth or adoption of a child
- the death of a family member or other beneficiary of your estate
- when an individual named as executor, trustee, or guardian dies or is
unable to act as such
- when you decide to name someone else as your executor, trustee, or guardian
Your Will should be reviewed if:
- the size of your estate changes significantly
- you move to another state
- there are changes in federal or state laws that could affect your estate
Revising a Will
A Will may be revised in three ways:
- Minor changes can be made to a Will by preparing an amendment called
a "codicil." A codicil needs to be executed with all the formalities
required for signing a Will but need not restate all of the unchanged provisions
in the Will.
- A Will may also be changed by preparing a new Will revoking the prior
Will or by destroying the old Will. Care must be taken when destroying
a Will to avoid intestacy (death without a Will).
- A Will may also be changed by independent events such as divorce or adoption.
In certain states, a divorce automatically revokes any bequest to the former
spouse. In other states, laws provide that a divorce revokes the Will entirely.
A new Will should be prepared in order to remove the spouse as a beneficiary
and/or fiduciary. The beneficiary designations on life insurance policies
and retirement benefits should also be reviewed.
TYPES OF BUSINESS ENTITIES
There are 4 main forms of business entities that most small and home business
owners operate as:
- Sole Proprietorship
- Limited Liability Company (LLC)
- A single-person operation that files no formal start-up documents with
the state (unless your state or county requires a business or professional
- Business itself doesn't file a tax return (all profits or losses are
reported on Schedule C, attached to your Form 1040).
- Does not limit the business owner's personal liability for the debts
of the business (unless you purchase errors & omissions insurance and/or
other types of business liability insurance).
to a sole proprietorship, but involves more than one person.
- You will need to draft some type of partnership agreement (usually involves
hiring a lawyer).
- The partnership doesn't file a tax return itself, but does file a federal
informational return, Form 1065, and provides a Schedule K-1 statement
to each partner so that each partner can prepare his/her Form 1040.
- Does not limit the partners' liability for the debts and obligations
of the business or debts incurred by one or more of the partners on behalf
of the business.
- Partnerships have no benefits of incorporation.
There are two types of corporations: C-Corporations and S-Corporations
While there are differences, both types of corporations have these similarities:
- The entity is legally separate and distinct from its owners.
- Generally, the creditors of a corporation must satisfy their claims by
seizing the assets of the corporation rather than the personal assets of
the shareholders. (There may be exceptions if you co-mingle business and
personal funds, don't follow corporate formalities, and/or engage in criminal
acts. To learn more about ensuring that you are not personally liable for
the debts of the corporation click on How To Avoid Piercing the Corporate
- This is the traditional form of a corporation (unless a corporation elects
to be an S-Corporation, it is automatically a C-Corporation).
- In order to have the stock of your corporation publicly traded on a stock
exchange, you must be a C-Corporation.
- Shares of a C-Corporation may be owned by another corporate entity and/or
by a non-U.S. citizen or non-resident alien.
- The number of shareholders is unlimited.
- There can be more than one class of stock (i.e. voting stock, non-voting
- C-Corporations are double-taxed (i.e. if a corporation has a $10,000
profit at the end of the year, it will pay tax on that amount, 33%. When
the remaining $6,667 is distributed to the shareholders, they will pay
personal income tax on that amount).
- Profit is taxed only once, otherwise known as pass-through taxation.
The shareholders pay personal income tax on any income/profit the corporation
earns. The corporation itself doesn't pay any tax.
- Ownership of an S-Corporation's stock is limited to U.S. citizens and
resident aliens in the U.S. The stock cannot be owned by other business
entities (i.e. a C-Corporation, S-Corporation, or LLC cannot own stock
in another S-Corporation) or by non-U.S. citizens / resident aliens.
- There can be no more than 75 shareholders.
- There is only one class of stock.
- Within the first 75 days from the date of incorporation, you must file
IRS Form 2553 in order to elect S-Corporation treatment by the IRS (meaning:
income of the corporation is only taxed at the individual shareholder level,
and not at the corporate level).
Limited Liability Companies (LLCs)
- An LLC is a hybrid of a corporation and a partnership.
- The owners are generally not liable for the debts and obligations of
- The entity is taxed like a partnership-income and losses of the LLC are
accounted for on the owner's individual tax returns.
- Can be owned by non-U.S. citizens / resident aliens and other business
entities (i.e. one LLC can own some or all of another LLC or C-Corporation).
- Can have an unlimited number of members (shareholders of an LLC are known
- Less formal than a corporation (no minutes, corporate resolutions, etc.
are required, although in order to maintain corporate formalities they