Choosing Witnesses

For a will to be legally recognized in the State of Washington, it must be:

1. In writing,

2. Signed by the testator (or by someone at his/her direction and in his/her presence), and witnessed by two competent people, and

3. Those witnesses must also sign the document (or sign a self-proving affidavit that is notarized) (emphasis added).

Witnesses are key. Without witnesses to testify that you did, in fact, intend to create a will and that you are competent and not creating it under duress, the court cannot be certain that your will is your will. The standard of practice today is for witnesses to sign a notarized self-proving affidavit, which states that he or she knows that you are 18 years of age or older, competent, not under duress; that you are intending to create a will, that you asked them to be there to witness the signing, and that you did, in fact, sign the will while they watched.

While anyone can serve as a witness, some people make better witnesses than others. A good witness is:

Someone who is not named in your will or who stands to inherit if you didn’t have a will. Why? The people who stand to inherit may present a conflict of interest — especially if any of your bequests may ruffle the feathers of your family. Avoiding controversy now by selecting neutral witnesses and you may curb will contests and litigation for your family in the long run.

Someone who knows you. While it is a common practice for attorneys to enlist their administrative support or paralegals to witness a signing, strangers are rarely the best option. Remember: it is the job of a witness to testify, if needed, that you were sane and signing your will without coercion or duress. In some firms, your first time meeting a witness might be 10 minutes before you sign. Compare that to a neighbor or coworker, who has known you (albeit superficially) for years. Who is the better judge of your competency? Remember: this person doesn’t need to read the contents of the will, they only need to sign a statement at the bottom of your will that they watched while you signed the will.

Do I need life insurance?

Life insurance can be an important part of an estate plan, but not for everyone. Many employers include a small life insurance policy for their employees, usually just enough to cover burial expenses. Additional life insurance can be useful, especially for the parents of young children or those who support a disabled spouse or child. However, you do not want to buy more insurance than you need. So how do you know whether you need it, and if you do, how much to buy?

Whether you and your family could benefit from life insurance depends on several long-term and short-term factors. The questions below can help you determine whether life insurance may help provide financial stability for your family. 

1. How many people depend on your earning capacity?
If the answer is "none," you probably don't need life insurance. 

2. How much money would your dependents need for living expenses?
There are several ways to determine this number. One is to take your annual salary and multiply it by 10. Why 10? Historically, the stock market has grown an average 10% every year since 1928. If your dependents invested the total life insurance, they should receive your annual salary in interest yearly. You may also want to take into account any property that would be inherited and deduct the value of its sale, as well as any other potential sources of income for your dependents (for example, gifts from grandparents who may step in if a disaster occurred). For many of my clients, $1-2 million per parent is a typical amount. 
It is also important to count the value of any stay-at-home parents in this equation. If that person suddenly passes away, there will be the additional costs of child care, home cleaning, meal preparation, and so forth. 

3. How long will it take for your dependents to become self-sufficient?
If your kids are young, you may need life insurance for 20 or 30 years, long enough to see the youngest through college. However, if your kids are already in high school, a 10-year policy should be sufficient to see them into adulthood.
Let me back up for a minute. I'm talking about term life insurance here, which expires after the term passes. Much like auto insurance, it is only in effect while you have the policy. After all, you don't need car insurance if you don't have a car. That's why it's important to figure out how long you will need insurance and to be covered only for the time in which it makes the most sense. Universal life insurance, on the other hand, is more like an investment or an enforced savings account -- you continue to pay into it throughout your life. When you pass, it passes to your designated beneficiary. It is a gamble whether you will end up paying more than the amount of the policy (if you live a long time) or less (if you die young), and it is debatable whether you would be better off investing that monthly premium in an investment account. For these reasons and more, most financial planners recommend against universal life insurance. If you're interested in learning more about universal life insurance, however, I encourage you to talk with your financial adviser. For most of my clients, term-life insurance is the best fit for safeguarding the future financial stability of their children. 

Now let's talk about your family's short-term needs.

1. What assets will be available to help with your families immediate financial needs?
Do you have a joint checking account? Can your spouse or the guardians for your kids access your bank accounts? Are most of your assets liquid (meaning they can be converted to cash easily) or not (like real estate, coin collections, etc)? 

2. After you die, how long will it take for your assets to transfer to your heirs?
While probate is not expensive, it can take months before payments can be made out of your estate. While there are court orders that can release family expenses early, life insurance can also help with immediate expenses. 

3. Will your estate owe substantial debts and taxes after your death?
This is also mostly an issue if there are not sufficient liquid assets to deal with immediate financial needs. If your estate is mostly non-liquid (real estate, business ownership, jewelry), they may be sold off quickly but for less than they are worth in order to cover those immediate financial needs.  While debt may not be a significant concern for your estate, it is worth thinking about now. 

Lastly, let's talk a bit about the impact of life insurance on your estate. The reason why life insurance can help with immediate financial needs is because it transfers to your beneficiary outside of the probate process. While your real estate and bank accounts are subject to probate proceedings that can take months, your life insurance will pay out to your beneficiaries within weeks (sometimes within days). 

However, for the purposes of estate taxes, life insurance is included. As I've said before, if you own a home in King County and have life insurance, you will probably exceed the estate tax exemption. The exemption amount changes every year -- for 2018, it's $2.129 million. If you're in this boat, I recommend consulting with an estate planning attorney. 

How to write your own will

Truth: not everyone needs an lawyer to help them write a will. 

How do you know if you should hire an estate planning attorney?

The American Bar Association recommends hiring an attorney if any of the following circumstances are true for you:
1. Complications with previous marriages, divorce, or blended families.
2. You, your spouse, or children have international citizenship.
3. You own or have interest in property in another state.
4. Your assets exceed a certain amount (this varies state-to-state and changes each year. In Washington, right now, it's $2.129 million, and that includes real estate and life insurance. Hint: if you own a home in King County and have life insurance, your estate will probably be higher than $2.129 million). 
5. You or your spouse are getting (re)married and could have complications with trusts, property ownership, or guardianship for your minor children.

None of those apply to you? Great! You probably don't need an attorney to help you write your will.

So what are the common pitfalls that people make when writing their own wills?
1. Not doing one at all. (Hint: you're probably already here!)
2. Not completing the process.
3. Doing one incorrectly, which can result in the will not being legally binding.
4. Leaving stuff out. It's amazing how often people forget about pets, businesses, or *how* to split assets among children. 
5. How and when assets and money are given. Some financial planners recommend spacing out payments instead of lump sums.
6. Not updating your will when you have kids, remarry, acquire new assets, or have other life changes. 

If you're serious about writing a will yourself, and none of those situations above apply to you, I highly recommend GYST. It is an informative site with links to free templates and a lot of well-researched state-specific information on wills, powers of attorney, living wills, and life insurance. 

If you have more questions, let me know. 

How to Choose a Personal Representative

One of the most important parts of your will is the appointment of your Personal Representative (aka PR). This is the person who will make sure that your wishes in your will are followed, and will settle all of your final bills and make distributions from your estate to your heirs. 

So how do you pick someone?

First, resist the temptation to name more than one person. While some of my clients don't want to pick between their kids or siblings, this is a job best done by one person. It saves time and energy to only require one signature, where as joint PRs may have to both sign. 

Second, this person will need to stay on top of deadlines and keep detailed records. He or she will talk to banks, insurance companies, realtors, and more. I recommend choosing someone who is good with details and known for being fair.

Third, I always recommend picking someone who will be aligned with your wishes. This could either be someone who stands to inherit from your estate, or someone who would support the person who will inherit (for example, your child's grandparent or favorite aunt). The Personal Representative is entitled to reasonable compensation for their work on your estate. However, if he or she draws a salary from your estate, then he or she will pay income taxes on that money. If he or she stands to inherit money from the estate (or supports that all of it is going to your kids), then he or she may opt not to be paid since the taxes on inheritance will be less (possibly even nothing). 

Lastly, always, always, always name back-up personal representatives. Most of my clients name their spouse as their first-choice personal representative, which makes the most sense as spouses have an unlimited exemption to inherit free from estate taxes and are likely to be the person most invested in carrying out your wishes. However, your spouse may not be able to serve for whatever reason. I recommend including a second and third choice, and then allowing for a professional fiduciary to serve just in case. 

How to Choose a Guardian

One of the most important decisions for many of my clients is the selection of a guardian for their minor children. There are many factors that should be considered when appointing a guardian.

First, I recommend that families think broadly about all of the available people who could be guardians. It often helps to think like a court would think: Who are the children related to? Grandparents? Aunts and uncles? Adult siblings? Then broaden the circle and look to your friends and neighbors. 

At this stage, I also recommend thinking about two different sets of potential guardians: the first are "permanent" guardians, who would have custody of your minor children if you pass away or are permanently incapacitated; the second are temporary guardians who could assume custody of your children during any temporary period of incapacitation. Imagine that you are in a serious car accident on date night. Both you and your partner are rushed into surgery. While you are in serious care and likely to survive, someone else will need to watch your children that night and perhaps for a few nights. Unless you have directions about who is authorized to take custody of your children in your wallet, the hospital social worker may be scrambling to find someone -- especially if your family lives out of state. A list of neighbors or local friends who are willing and able to temporarily care for your children in an emergency is a critical part of your guardianship planning. 

Now that you have two lists, the next step is to consider what values are most important to you for each group. For permanent guardians, some of my clients prioritize familiarity with the children and genetic closeness. Others prioritize the age of the guardians, their religious beliefs, and their financial resources. I highly recommend discussing this list with your co-parent, as many disagreements as to whom the best candidates are can be alleviated by focusing on which values you want to prioritize together for your children. 

Third, compare your first list to your value set. Some clients even create a grid where they can objectively compare which possible guardians meet all of the values and which do not. Once you have applied your values to your list of all possible guardians, and after discussing with your co-parent, you can select your guardians for both permanent and temporary appointment. 

And then you can select your second and third choices. While you may be certain that the first person you list will agree to serve, unexpected circumstances can arise between now and when the appointment would take effect. The people you nominate always have the option to decline should the agreement need to be in effect.

To that end, when you think about your back-up guardians, also consider whether you want to nominate an individual rather than a couple. While many of my clients name married couples as guardians, this can pose a problem if the couple should divorce or if one partner dies before the the guardianship begins. Do you only want the couple to serve as guardian jointly? If so, be sure that your intent is clear in your appointing documents. 

One last piece of advice: it is always a good idea to talk to your potential guardians before naming them. Let them know why you would like to name them and what's most important to you in raising your children. Be sure to discuss any concerns they might have, and discuss these with your attorney. Guardians may be hesitant for financial reasons, and knowing that there will be a minor trust for your estate and how that can be used may ease their concerns. 

But more about that another day. 

Durable Powers of Attorney

A Durable Power of Attorney is a document that appoints someone (usually not an attorney) as your representative in the event that you are incapacitated or unavailable. There are two common types: for health care and for finances. 

A Durable Power of Attorney for health care appoints someone to make health care decisions for you when you are incapacitated. These typically take effect when you are found to be incapacitated. Under Washington State law, your spouse is the default decision-maker, but sometimes your spouse isn't available or the hospital has doubts about your legal relationship. What's the easiest way to provide clarity? And who is your back-up? In one document, you can appoint your spouse as the first choice and name 1-2 back-up people. I highly recommend talking with the people you appoint about what's important to you in your health care decisions, and making sure that each of them knows where a signed copy of your Power of Attorney for health care can be found, should it be needed. 

A Durable Power of Attorney for financial decisions is also important. If you are incapacitated or unavailable, would your spouse have access to all of your bank accounts? Brokerage accounts? Emergency funds? This can be effective immediately, rather than requiring incapacity, which can be useful if one spouse travels frequently or may simply be unavailable. It is increasingly common for married couples to maintain one or more bank or credit accounts in their separate name, but to pool resources jointly. If you or your spouse is suddenly unavailable, would the mortgage still get paid without access to those separate accounts? If not, and if you want to maintain your separate accounts, a Durable Power of Attorney could be the back-up plan answer. 

What's the difference between an will and an estate plan?

I am often asked if I can help with a will, and I always respond that I can assist with your estate plan. Why do I do that?

A will is a document that details what your assets are and who should inherit them, and who should be in charge of settling your debts and distributing any remaining assets. It is part of an estate plan.

An estate plan, by contrast, also includes Durable Powers of Attorney for health care and finances, and, if you are a parents, the appointment of a guardian for your minor child(ren), and possibly a trust to manage any assets they would inherit from you. Sometimes it also includes Advance Directives (also called a "Living Will") which addresses end-of-life decisions. The exact documents that you need will depend on your life situation -- your age, marital status, assets and liabilities, children (and their ages), and what you want to accomplish with your plan. 

As such, when we meet to talk about your estate plan, we will talk about more than just who will inherit your assets. We will also talk about who you want to make end-of-life decisions for you if you incapacitated, and what your family will need to move forward after you pass. 

Also, your estate plan should need to be updated every few years, depending on your life circumstances. The plan we create while your kids are in grade school should be very different from the one we create when you have grandchildren. I follow-up with past clients every three years to review their plans. Sometimes they are still accurate; often, there are small changes that we need to make -- for example, if you buy a new home, get divorced or married, have another child, or any myriad of other circumstances. It is not unusual to rewrite your whole plan every decade, which will give you the peace of mind that the plan you have will work for you should the unthinkable happen tomorrow.