Perhaps the first question should be, “What does a will do?” Your will determines how any property you own at death will be distributed to your heirs – provided you have not made other arrangements.

What other arrangements would you have made? In some cases, you bought property that the deed states who gets it at death. For example, the deed to your home probably lists you and your spouse as joint tenant with right of survivorship – which simply means that if either of you die, the survivor owns it all. Ownership transferred by deed is not affected by the will. Contracts you have made usually state who the subsequent owner will be if the owner dies. An example of this type of contract is a life insurance policy. Also, a business owner may have agreed to a “Buy and Sell Agreement” with a partner or co-owner. If the contract provides for the successor owner, then it is not affected by the will.

Your will expresses how you want your remaining property to pass. But did you know that if you have not written a will, your state government has done it for you? If you die without a valid will, your assets will pass to your heirs according to state law. Each state writes its own intestacy laws that serve as a “generic will” for its residents. Without even knowing what the state will (intestacy law) says, you probably find it offensive to think the state will decide who gets your properties. Creating your own will allows you to express how you want your remaining properties to pass.

Law—Their Way

Lawmakers design the intestacy laws based on what they think you would want to happen. These laws vary from state to state.

Usually, the distributions occur as follows:

• If your spouse survives you, and you have no children, your spouse inherits the estate. However, in some states, your parents and your spouse split the estate or any real estate.
• If your spouse and children survive you, each inherits a portion of the estate, even if the children are minors.
• If only your children survive you, they inherit the estate, and if they are minors, the court appoints a guardian for them.
• If you have no surviving spouse or descendants, your parents inherit the estate. If your parents are deceased, your siblings inherit the estate. If you have no surviving siblings, your next of kin inherits the estate.
• If you have no next of kin, your state of residence takes over possession of your estate.

Will—Your Way

Creating a will allows you to express how you want your probate property to pass. Probate property consists of any assets not contractually promised or jointly owned.

Advantages of a Will:

• You choose who gets your remaining property.
• You designate an executor of your choice to carry out your intentions.
• You can design your will so that you actually reduce estate taxes.
• You can appoint a trustee and/or guardian to manage your assets for your minor children.
• You can amend or revoke the will at any time.

Why create a will? A will allows you to distribute the property you worked a lifetime to accumulate to whomever you choose. A will must meet certain requirements to be valid in your state. Always seek legal advice in creating or changing your will. To be sure your will works as you intend, always consult your legal counsel before signing any contracts or deeds, as they can undermine or contradict your will.

Why create a will? It’s as simple as making distributions at death your way, or their way.

By Maxey Sanderson

Reprinted with permission: PlanLab News

There is no more important investment truism than this: that the very worst place in the world to be looking for guidance to the markets of the next ten years is a rear-view mirror, in which you can clearly see the last ten (or however many) years.

In fact, the more dramatic and extreme the last ten years were, in any respect, the more likely the next ten are to be not merely different, but just the opposite.

If you looked in the rear view mirror ten years ago—in the summer of 1999—you saw index returns of 20% a year streaming behind you. Moreover, you saw returns far greater than 20% routinely available from the “new paradigm” of tech, telecom and especially dot.com, as the Internet—for so the pundits said—was proceeding to repeal the business cycle—and with it, presumably, the market cycle.

It wasn’t long thereafter that the broad equity market declined 50%, and NASDAQ—cradle of the new era—went down 80%, taking some five trillion dollars of stock market capitalization with it.

Today, a hard glance into the rear view mirror shows ten years of essentially zero returns from equities, after a decade bookended on the front end by the aforementioned stock market implosion, and on this end by the total meltdown of the entire global financial system. If history is any guide—and it’s about the only guide we have—this isn’t the time to be anticipating a long period of substandard equity returns. Indeed, quite the contrary.

The chart, above right, shows that, far from being an entirely new and terrible phenomenon, the recent unpleasantness was actually the third time in roughly the last century that equities delivered no net return for ten years. The first ended in 1935—no surprise there—and the second in 1974. Much more to the point, the chart shows that ten-year rolling annualized returns trended higher for relatively long periods of time after both of those previous troughs, eventually cycling up toward 20%. There was really only one reliable way completely to miss these periods of exceptional returns. And that was to be guided by the relatively recent past—by staring fixedly into the rear view mirror.

Mark Twain famously said that history does not repeat itself, but it rhymes. The 1930s (a period of intense deflation) were quite unlike the 1970s (our only real episode of hyperinflation). And neither era has much resonance with ours, either in its causes or its effects. What remains, and seems ever to reassert itself, is the cycle.

A while ago, we were making too many gas-guzzling cars that were too expensive, not least of all because they had labor costs embedded in them that rendered them uneconomic. That has ended now—rather dramatically, in the bankruptcy of two of the Big Three U.S. automakers—and we’re not even producing as many cars as are (at historic rates) being scrapped. That probably can’t continue: at some point, people start having to buy new cars again, and the production cycle resumes.

A while ago, we were building far too many houses and condominiums on spec, and selling them to people who couldn’t afford them with mortgages that were little more than consumer frauds. Those mortgages were then packaged up and sold to (and by) banks and other institutions which apparently had no idea of the risks they were taking on. This, too, is spectacularly over, and (at wonderfully low mortgage rates) we are running off the inventory of unsold homes.

Given population growth and knockdowns of old houses, the long-term trend of housing starts in the US is around 1.6 million a year; in May we started them at a 532,000 annual rate. Again, at some point the cycle of new construction turns up, adding substantially to GDP growth, just as it penalized growth sharply in the recent housing depression.

A while ago, we decried the historically high levels of household debt Americans were carrying, and their penchant for using the ever-increasing equity in their homes as a species of ATM. Shocked by the economy and the markets, and fearing for their jobs, Americans are rapidly deleveraging today, and the savings rate is soaring.

To everything there is a season, as the author of Ecclesiastes says, and a time to every purpose under the heaven. You might do well, here—in consultation with your financial advisor—to take a deep breath, step back away from the news headlines, and try to start thinking again in terms of the cycle. As you do that exercise, have another good long look at this chart.

You may decide that it’s trying to tell you something.

© 2009 Nick Murray. All rights reserved. Reprinted by permission.