Wills & Trusts Kit For Dummies®

Table of Contents


About This Book

A Special Note for Residents of Louisiana

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Part I: Getting Started with Your Will or Trust

Part II: Everything You Need to Know about Wills

Part III: Trust Me! How Trusts Work

Part IV: Carrying Out the Intent of Your Will and Trust

Part V: The Part of Tens

Part VI: The Appendixes

About the CD

Icons Used In This Book

Where to Go from Here

Part I: Getting Started with Your Will or Trust

Chapter 1: Ensuring That Your Last Wishes Are Honored

The Good, the Bad, and the Ugly: What Can Happen When You Don’t Plan Your Estate

Reaping the Benefits of Planning Your Estate

Planning for your care while you’re alive

Ensuring that your assets go where you want

Looking Out for Common Pitfalls

Benefits and dangers of jointly titling real estate, property, and bank accounts

Benefits and dangers of life estates

Danger of subjecting an asset to Medicaid spend-down rules

Potential for increased tax exposure

Realizing What Happens If You Don’t Have an Estate Plan

Following the laws of intestate succession

Determining the custodian of your minor children

Creating Your Will or Trust

Deciding who should create it

Understanding the process

Thinking about your kids, money, life insurance, and more

Chapter 2: Making Crucial Decisions

Going It Alone

Are you comfortable doing it yourself?

How complicated is your estate?

Choosing a Will or Trust for Your Estate

What a will can do for you

What a trust can do for you

You may benefit from having both

Going with a Pro

How lawyers and accountants can help

Do you save money in the long haul?

Working with a Professional

Hiring a lawyer

Meeting with your lawyer

Reviewing and executing the documents

Taking the final steps

Safeguarding Your Estate Plan

The problem of the disappearing document

Storing your will or trust

Registration of wills and trusts

Chapter 3: Gathering Pertinent Information

Asking Yourself Some Basic Questions

Identifying Your Assets

Real estate

Personal property

Titled personal property



Insurance policies and annuities

Retirement savings


Considering Community and Jointly Owned Property

Valuing Your Property

Chapter 4: Planning Your Bequests

Calculating Your Assets

Determining Your Intended Heirs and Beneficiaries


Institutions or charities

Other bequests

Thinking about Your Family Circumstances

Estate Planning for Second Families

Giving your new spouse a life estate

Using trusts to hold your assets

More tools to consider

Estate Planning for Your Business

Inheritance of your sole proprietorship

Inheritance of your share of a business

Appointing the People Who Will Carry Out Your Estate Plans

Choosing your personal representative or trustee

Choosing a successor

Discussing your estate plan with your helpers

Finding Professionals to Assist You

Getting help from a lawyer

Hiring an accountant

Using professional trust services (institutional trustees)

Chapter 5: Providing for Your Children and Dependents

Choosing a Guardian

Making the decision

Choosing a guardian other than the noncustodial parent

Managing Your Child’s Assets

Providing for Your Child’s Needs

Your child’s education

Your child’s special needs

Your child’s financial stability

Chapter 6: Dipping into Your Pocket: The Tax Man (and Others)

Tallying Up Your Estate’s Tax Liabilities

Federal estate taxes — a moving target

The generation-skipping transfer tax

State estate taxes

Gift taxes

Minimizing Tax Costs and Liabilities

Leaving your estate to your spouse

Making gifts

Using trusts to avoid estate taxes

Creating a Family Limited Partnership

Seeing the Big Picture: Tax Avoidance Should Not Dictate Your Estate Plan

Paying Your Estate’s Debts

Medical costs and Medicaid reimbursements

Payment of bills, loans, and mortgages

Payment of funeral expenses

Covering Administration Costs

Court costs

Legal fees

Administrator’s fees

Trustee’s fees

Part II: Everything You Need to Know about Wills

Chapter 7: Writing and Signing a Will

Deciding Whether a Will Serves Your Needs

Simplicity often leads you to a will

Assets not covered by a will

Exploring the Types of Wills

The statutory will

The handwritten (holographic) will

A will of your own

Other wills

Elements of a Will

Who you are

What are your assets

Who are your beneficiaries

What are your bequests

Reference to a tangible personal property memorandum

What happens with the residue (if any) of the estate

Payment of debts by the estate

Describing your funeral and burial wishes

Designating a personal representative

Designating a guardian for any minor children

Your signature

Executing a Valid Will

Choosing the right witnesses

Signing and executing your will

Chapter 8: Navigating the Land Mines

Identifying Common Land Mines

Disinheriting heirs, known and unknown

Avoiding invalidating part or all of your will

Lashing out from beyond

Handling simultaneous death of spouses

Realizing Why You Must Update Your Will

Your goals and wishes may change over time

Your assets may change over time

Family changes may invalidate your will

Family changes may dramatically alter who inherits under your will

Knowing What to Do If You Lose Your Will

Chapter 9: When You Already Have a Will

Reviewing and Updating Your Will

Changes in your family circumstances

Changes in your wishes

Changes in your financial situation

Changing Your Will

Adding to your will (amendment by codicil)

Executing a valid codicil

Revoking Your Will

How to revoke a will

What to do with a revoked will

Chapter 10: Estate Administration: What Happens in Probate Court

Navigating Probate Court

Discovering How Estate Size Affects Probate Procedures

Probate for small estates

Probate for larger estates

Understanding the Role of the Personal Representative

Giving notice to legal heirs

Collecting property for distribution

Notifying and paying creditors

Distributing bequests

Hiring a Lawyer

Overseeing Probate: The Judge

Avoiding Will Contests


Mental incapacity

Undue influence

Part III: Trust Me! How Trusts Work

Chapter 11: The Anatomy of a Trust

What’s a Trust and Why You Need One

Benefitting from Trusts

They’re flexible

You can provide for your incapacity

You can avoid taxes

You can avoid probate

A trust can help protect your privacy

Selecting a Trustee

Choosing Your Beneficiaries

Transferring Assets into Your Trust

Staying in control

Giving (or limiting) your trustee powers

Cancelling the trust

Distributing trust assets

Putting Your Trust into Effect

When the Trust Ends

Chapter 12: Dead or Alive: Picking Your Trust

Why So Many Choices?

The Revocable Living Trust

The benefits

Possible drawbacks

Choosing from Other Trusts

Trusts to avoid the tax man: Asset protection trusts

Trusts for people who can’t manage money: Spendthrift trusts

Trusts for doing good: Charitable trusts

Trusts to avoid gift taxes: Crummey trusts

Trusts for people who receive government benefits: Special needs trusts

Trusts to protect your estate plan if you predecease your spouse: Bypass trusts

Trusts where you control the trust assets

Trusts that own life insurance: Irrevocable life insurance trusts (ILITs)

Trusts for multiple generations: Dynasty trusts (generation-skipping trusts)

Trusts to postpone estate taxes: Qualified terminable interest property trusts (QTIPs)

Trusts for your pet

Deciding Which Trust Is Right for You

Serving your personal needs

Serving the needs of your family

Thinking about the tax man

Chapter 13: When You Already Have a Trust

Creating the Trust Isn’t the End of the Story

Transferring Assets into Your Trust

Real estate

Financial accounts

Other assets

Reviewing Your Trust

Does the trust still serve your needs?

Does the trust still fulfill your goals?

Is the trust adequately funded?

Amending Your Trust

Restating a Trust

Revoking a Trust

What Happens If You Die?

Can you avoid probate?

Should you also have a will?

Part IV: Carrying Out the Intent of Your Will and Trust

Chapter 14: Planning for Your Incapacity

Planning for Incapacity Has Many Benefits

You avoid guardianship and conservatorship proceedings

You get to choose who cares for you

You ensure that your wishes are followed

Drafting a Living Will

Discussing your wishes

Executing a living will

Distributing copies of your living will

Reviewing your living will

Looking into Other Advance Directives

Healthcare proxies

Your medical advocate

Special instructions: Your wishes for your care

Executing a Healthcare Proxy

Distributing copies of your healthcare proxy

Revoking a healthcare proxy

Designating Your Financial Powers of Attorney

Selecting power of attorney

Deciding between durable powers of attorney or periodic renewal

Drafting your durable power of attorney

Executing power of attorney

Revoking a power of attorney

Chapter 15: Those Cushy Retirement Funds

Exploring Retirement Savings Accounts

Retirement savings accounts available to anyone

Employment-based retirement savings accounts

Self-employed retirement savings accounts

Putting Off the Tax Man

Moving Assets from One Tax-Deferred Investment to Another

Designating a Beneficiary

Selecting your beneficiary

Changing your beneficiaries

Maintaining Control Over Your Accounts

The Tax Consequences of Putting Your Retirement Savings into Your Estate

Chapter 16: Life Insurance: Making Sure It Doesn’t Backfire

Taking a Look at the Different Types of Life Insurance

Term life

Whole life

Universal life

Variable life

Deciding Who Owns the Life Insurance

Ownership by a spouse

Ownership by a child or children

Ownership by a qualified plan

Ownership by a trust

Designating Beneficiaries for Your Insurance Policy


Child or children

Another individual

Multiple beneficiaries

A trust

Your estate

Chapter 17: Your Castle: How It’s Owned Makes a Huge Difference

House, Condo, Co-op, or More: Exploring the Types of Residential Properties

The single-family home

The condominium

Housing cooperatives (co-ops)

When your residence is a manufactured home or boat

Ownership of Your Residence

Ownership by one person: Sole ownership

Ownership by two or more people

Life estates

Community property laws

Special issues for domestic partners

Should Ownership of Your Home Be Held by Your Trust?

The Drawbacks Of Adding Your Heirs to the Title

The cons outweigh the pros

Possible tax consequences

Possible Medicaid consequences

Leaving Real Property by Will or Trust

Remembering Other Properties

Vacation properties

Investment properties

Business real estate


Part V: The Part of Tens

Chapter 18: Ten Common Will Mistakes

Not Updating Your Will

Being Too Specific in Your Bequests

Forgetting to Address the Residuary of Your Estate

Leaving Everything to Your Spouse

Leaving Nothing to Your Spouse

Including Items in Your Will That Pass Outside of Your Estate

Improper Witnessing of Your Will

Losing Your Will (or Making It Impossible to Find)

Forgetting to Leave Good Financial Records

Forgetting That Your Estate Needs Cash

Chapter 19: Ten Reasons to Have a Trust

You Avoid Probate

You’re Prepared for Incapacity

You Avoid a Will Contest

You Protect Your Heirs

You Can Protect Estate Assets from Creditors and Lawsuits

You Plan for Second (and Third, and Fourth) Marriages

You Plan for the Future of Your Business

You Can Transfer Real Property Located in Another State

You Have Continuity of Investments

You Avoid Taxes

Chapter 20: Ten Tax Traps to Avoid When Planning Your Estate

Not Planning Your Estate

Focusing Too Much on the Estate Tax

Assuming that the Estate Tax Will Not Change

Trying to Guess How the Estate Tax Will Change

Not Taking Advantage of Your Lifetime Gift Exclusion

Not Engaging in Business Succession Planning

Hiding Property Transfers and Gifts from the IRS

Having Your Estate Be the Beneficiary of Your Life Insurance

Not Preparing Your Estate to Pay Any Estate Tax Owed

Forgetting That Your Estate Will Grow Over Time

Part VI: Appendixes

Appendix A: State Signing Requirements

Appendix B: State Inheritance Taxes

Appendix C: Estate Planning Worksheet

Personal information

Goals and priorities

Family information




Your advisors

Estate planning documents

Personal representative

Guardian for minor children


Estate taxes


Trust provisions

Funeral and burial arrangements

Trustees and alternates

Property to transfer into trust*


Distribution of trust assets

Conditions on distribution

Special concerns

Choice of agent

Powers granted

Preferences for the sale of property

Choice of medical advocate

When should treatments cease

Treatments that may prolong life

Comfort and pain relief

Place of death

Appendix D: About the CD

Wills & Trusts Kit For Dummies®

by Aaron Larson


About the Author

Aaron Larson is an attorney practicing law in Ann Arbor, Michigan, where he lives with his wife and daughter. After graduating from the University of Michigan Law School, Aaron started practice as a quintessential small town lawyer, providing legal services that included estate planning, probate, and guardianship services. He subsequently worked for the Institute of Continuing Legal Education in Ann Arbor, Michigan, where he developed professional education programs for lawyers in areas including estate planning, litigation, and family law. His present legal practice focuses on civil appeals. He operates the ExpertLaw Web site (, offering free legal information and assistance to consumers, as well as resources for legal professionals.


To my wife Laura and our wonderful daughter Emma.

Author’s Acknowledgments

I would like to thank the following people for their invaluable contributions to this book.

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments through our online registration form located at For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.

Some of the people who helped bring this book to market include the following:

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Layout and Graphics: Carl Byers, Reuben W. Davis, Melissa K. Jester Christine Williams

Proofreaders: Melissa Bronnenberg,John Greenough, Linda Seifert

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Special Help: Cynthia Davis-Hubler

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Congratulations. Simply by opening this book you have put yourself a step ahead of most people. Yes, it’s tough to think about what will happen to your family after you die, but confronting these issues is part of taking care of your family.

My goal in writing this book is to give you the information and resources you need to create an estate plan. This book includes do-it-yourself tools to help you draft your own estate planning documents.

But don’t go thinking that this book will help you only if you want to create your own will and trust. It’s much broader in focus. I want you to be comfortable with estate planning documents, but also to recognize when you’ll benefit from professional estate planning services.

I am of the strong opinion that everybody needs an estate plan, and especially a will. With this book, anybody can create a simple will, even if it serves just as a stopgap before hiring a professional.

About This Book

Wills and Trusts Kit For Dummies is written in language that is easy to understand. It covers the basic issues in planning your estate, but also delves into the details and complications you can encounter in choosing your estate plan and creating a will or trust.

You probably won’t read this book and conclude, “This is easy,” but you’ll probably conclude, “I can do this.” If not, or if you realize that you simply don’t want to plan your own estate, that’s fine, too. You’ll be an educated consumer when you hire a professional to draft your estate plan.

Everybody needs an estate plan, so I’ll immodestly claim that anybody who doesn’t have an estate plan will benefit from reading this book. You’ll also benefit if your estate plan is out-of-date, and you’re not sure whether or how to update your plan.

A Special Note for Residents of Louisiana

If you’ve been shopping around for books on drafting your own will, you’ve probably found that most of them say, “This book is valid for all states except Louisiana.” You see this warning for two reasons:

Louisiana’s laws governing the execution of a will are more complicated than those of other states, and a mistake can invalidate your will.

More importantly, Louisiana’s unique forced heirship laws will trump inconsistent bequests in your will, and you’re severely limited in your ability to deviate from the state’s mandatory bequests.

Even if you create an otherwise valid will, without a good understanding of forced heirship laws, a court may end up largely disregarding your will or allocating your estate in a way that bears little resemblance to what you directed.

It’s beyond the scope of this book to give you the state-specific understanding you need to be sure that a Louisiana court will uphold your will. I thus reluctantly urge residents of Louisiana to have their wills drafted by a legal professional.

Conventions Used in This Book

Whenever you see a word in italics, I’m either introducing a new term or using it for emphasis. Likewise, all Web addresses appear in monofont type.

What You’re Not to Read

Throughout the book, I include sidebars that contain information and anecdotes that expand on the topics discussed in the chapters. You’ll easily spot the sidebars by their gray background color. The sidebars can be amusing and informative, but there’s nothing in them that you have to read to understand the material in this book. If you’re pressed for time, skip over the sidebars. If you find the time to read them later, they’ll still be there.

Foolish Assumptions

When writing this book, I had to make a few assumptions about you, the reader. If you meet any of these qualifications, you can find what you need in this book:

You don’t know much about estate planning and want to get a comprehensive understanding of what is involved.

You have a small to average estate and want to create your own estate plan composed of a will and possibly a living trust.

You have a large estate and want to do the basics of your estate plan yourself while getting professional assistance with specialized trusts and tax planning.

You have absolutely no desire to plan your own estate, but want to know how the estate planning and probate processes work and want to know what you’re doing when you hire an estate planning professional to create your estate plan.

I also assumed that you have a computer and can use it to print the worksheets from the accompanying CD to create your own estate planning documents. (You don’t have a computer? Then I’m assuming you have a friend who can print the forms for you.)

How This Book Is Organized

This book is organized into six parts that guide you through the estate planning process and specific estate planning documents. I include some stories and anecdotes to help you understand the concepts I discuss.

Part I: Getting Started with Your Will or Trust

This part explains why you need to plan your estate, the dangers of failing to do so, and the many benefits you get from completing your estate plan. I also cover some of the most important aspects of estate planning, and some of the biggest mistakes people make. You find out when you should get help from an estate planning professional, what professionals can do for you, and how to work with them.

Part II: Everything You Need to Know about Wills

This part helps you understand the central role of your will in your estate plan and the importance of keeping your will up-to-date. You also find out what you need to know about probate court.

In addition, you discover common landmines that can disrupt your estate plan and what you can do to avoid will contests.

Part III: Trust Me! How Trusts Work

If you’re considering using a trust for your estate plan, it’s important to know exactly what trusts are and what they can do for you. You’ve heard of a revocable living trust, but what about other types of trust. How can trusts help you avoid estate taxes? This part has all the answers.

Part IV: Carrying Out the Intent of Your Will and Trust

After you figure out the basics of your estate plan, you still have a bit more work to do. You need to take a look at how your retirement and life insurance plans figure into your estate and the special issues that can arise from your real estate holdings. You also need a plan for your personal and financial care in case of illness or disability. This part addresses those topics and more.

Part V: The Part of Tens

This part contains lists to help you with common estate planning issues and traps. I describe mistakes people often make when planning their wills and highlight situations where you may benefit from having a trust. I also tell you how to avoid traps that may increase your estate taxes.

Part VI: The Appendixes

This part contains supplemental information to help you complete your estate plan. Appendix A describes state law signing requirements for wills. Appendix B summarizes state estate and inheritance taxes. Appendix C is a form that you can use to help gather information for your estate plan. Appendix D lists the forms provided on the accompanying CD.

About the CD

The CD accompanying this book includes forms and worksheets for creating your estate planning documents. You can print them and mark them up by hand or fill them in on your computer and use them to produce your final documents. See Appendix D for a lot more information about the CD and the forms it contains.

Icons Used In This Book

In the margins of the pages of this book, you’ll find little pictures, called icons. These icons call your attention to important points about estate planning and help you avoid mistakes:

Tip.eps When you see the Tip icon, you find hints and suggestions to help you with your estate plan.

Warning(bomb).eps The Warning icon flags a potential trap or pitfall that you may encounter and helps you avoid costly mistakes.

Remember.eps The Remember icon highlights important actions to take and elements of your estate plan that you truly should not forget.

Louisiana.eps The Louisiana icon flags unusual aspects of that state’s laws, which make it very difficult to draft your own will.

OnTheCD.eps This icon lets you know that you can find a form on the accompanying CD corresponding to the estate planning document or process described in the passage you’re reading.

Where to Go from Here

You don’t have to start at the beginning of this book and read straight through if you don’t want to. This book is designed so that you can look at a topic you’re interested in and flip straight to that discussion. However, if you’re new to estate planning, consider reading through this book to get an overview of what’s involved.

If you’re about to do something dangerous and need an estate plan “yesterday,” you need a will so start with Chapter 7.

If you’re concerned about how much of your estate will get eaten up by taxes, the news (good and bad) is in Chapter 6.

If you have young children and want to be sure that they’re taken care of, proceed to Chapter 5 for some quick guidance.

If you have a will or trust already, Chapters 9 and 13 cover how to update your estate plan and amend or replace wills and trusts.

Part I

Getting Started with Your Will or Trust

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In this part . . .

This part explains why you need to plan your estate and the dangers of failing to do so. You find out the process of planning your estate, the tools you can use, and when you need to get help from a professional estate planner. You also discover the process of gathering information about your heirs and assets and planning your bequests. You discover how to plan for special family and personal circumstances, including the care of your children, and avoiding taxes.