A will is a legal document that's used to transfer assets you own to the people or organizations you want to leave them to after your death. In it, you name an executor (or personal representative), who is the person you choose to carry out your wishes, and an alternate in case your first choice is unable to serve. If you have minor children, you use the will to name a guardian to care for them.

Who Needs a Will?

As soon as you acquire your first assets as an adult (car, stocks, bonds, stereo equipment, savings accounts), get married, or have a baby, you should make a will. If you die intestate (without a will) the state will determine who gets what. More importantly, the state will decide who will gain guardianship over your minor children, regardless of what your wishes were and who you expressed them to. Don't operate under the common misconception that if you die intestate, your spouse will inherit all your property. In fact, if you have kids, in most states your spouse will receive between one-third and one-half of your assets and the rest will be split among your kids, no matter how young they are.

If you're married with no kids, in most states your spouse will get one-third of your assets and your parents will get the rest. If your parents aren't alive, your siblings will inherit. In some states, your children from a previous marriage or relationship could be disinherited and your entire estate could go to your new spouse. If you're unmarried and childless, the state will divide your estate among your relatives as it sees fit.

If you're in your twenties, single, and don't own much, you may feel that a will is unnecessary. Still, you probably own things that don't have any great monetary value but do have sentimental value and that you'd like a particular person to have. There may be other things you'd rather didn't end up in someone else's hands.

What to Include in Your Will

The first step in estate planning is getting a handle on what you own so you can decide whom to leave it to. If you've followed the advice in Chapter 1, you've already prepared a Net Worth Statement and have a good idea of the value of your assets and belongings. To this list, add those items that have meaning to you but may not have a significant monetary value, such as family photo albums, personal journals, book or record collections, and pets.

Decide how you want your assets distributed if you die. For your primary beneficiaries, use percentages, not fixed dollar amounts, so that your will remains up-to-date as your assets increase or decrease. You can use fixed dollar amounts for secondary beneficiaries, for instance, if you want to leave money to a niece or nephew whom you dote on.

Issues that you might want to address in your will include:

• Whether you want equal or unequal shares to go to your heirs.

• What age you want your kids to be when they inherit.

• How you want to distribute property that can't be divided without being liquidated or sold, such as a house.

• What special arrangements you want made for kids from a previous marriage.

• Whether you should make special provisions for one of your heirs who doesn't handle money wisely.

• What arrangements you want made for a special-needs child who requires special care.

One of the most important functions of your will is to identify whom you'd like to have raise your kids in the unlikely event that you can't. It will put your mind at rest knowing that if something happens to you and your spouse, your kids will be taken care of by someone you trust. Name one person to act as guardian for each of your kids and one alternate guardian in case the first choice can't serve. If you name coguardians, such as your sister and her husband, and they split up, they could fight for guardianship. If it's your intention for your sister to act as guardian, name her alone. You can name different guardians for each of your kids. For instance, if you have kids by two different spouses, you may want them to be taken care of by two different guardians. Talk to the person you want to name as guardian and make sure he or she is willing and able to do the job.

Is It Necessary to Use a Lawyer?

Unless your estate is very large or you have complex issues to cover, you can draw up your own legal will without paying for an attorney. There are good books available to guide you through the process, but the best way to do it yourself is by using computer software such as Quicken Lawyer 2003 Personal, which walks you through the process by asking questions, and then generates a will that is legal in all fifty states.

The Legal Requirements for Signing a Will

For a will to become legal, it should be typed or computer-generated. Handwritten wills are legally binding in only twenty-five states and those states have different requirements about signing the pages and other issues, so it's much safer to have it typewritten. Your will must state that it's your will and it must be signed and dated; at least two (in some states three) people who won't inherit anything under the will must witness your signature and sign their names to the will. The witnesses must watch you sign and you must watch them sign. They don't need to read the will or know what's in it.

Durable Power of Attorney for Finances

A durable power of attorney (a form that must be signed in front of a notary public) allows you to appoint a trusted agent to manage your financial affairs if you become unable to do so yourself due to physical disability or mental incapacity. The power of attorney lasts until your death, unless you revoke it. The person you give power of attorney to can enter into contracts, negotiate, pay bills, buy and sell property, and handle your other financial affairs on your behalf if you're not able to.

These documents are important for elderly people who may suffer from Alzheimer's disease or senile dementia, but they have to be created and signed while the person still has his mental faculties. You may become acquainted with durable power of attorney long before you need one yourself because your parents or an older relative may ask you to become their durable power of attorney.

Keep in mind that every institution may not honor your power of attorney. Some banks or brokerage houses may require you to use one of their forms. Even if you have a legitimate legal document, they may refuse to honor your instructions. Check with every institution that you'll need to deal with, and find out if you need to use a specific form.