Create a Will: Usually any person over the age of 18 who is mentally capable, commonly stated as "being of sound mind and memory, can make a will." Your state may impose additional requirements to make a will.

If you have no apparent heirs and die without a will (intestate), it's possible the state may claim your estate. If you have young children, it's especially important to make a will to designate a guardian in the event of your death. Without a will, the court will appoint a guardian for your children. When you make a will include:

- Your name and place of residence
- A brief description of your assets
- Names: spouse, children, beneficiaries, charities or friends
- Alternate beneficiaries, in the event a beneficiary dies before you
- Specific gifts, such as an auto or residence
- Establishment of trusts, if desired
- Cancellation of debts owed to you, if desired
- Name of an executor to manage the estate
- Name of a guardian for minor children
- Name of an alternative guardian
- Your signature
- Witnesses' signatures

An executor is the person who oversees the distribution of your assets in accordance with your will. Most people choose their spouse, an adult child, a relative, a friend, a trust company or an attorney to fulfill this duty. You should expect your estate to pay an independent executor for this service. If no executor is named in a will, a probate judge will appoint one. Probate refers to the legal procedure for the orderly distribution of property in a person's estate. The executor files the will in probate court, where a judge decides if the will is valid. For valid wills, assets are distributed according to the will. If the will is found to be invalid, assets are distributed in accordance with state laws.

Responsibilities usually undertaken by an executor include:
- Paying valid creditors
- Paying taxes
- Notifying Social Security, other agencies and companies of death
- Canceling credit cards, magazine subscriptions, etc.
- Distributing assets according to the will

Preparing a will
Start by organizing what you need: outline your objectives, inventory your assets, estimate your outstanding debts and prepare a list of family members and other beneficiaries. Use this information to carefully consider how you want to distribute your assets. Ask yourself lots of questions: Is it important to pass my property to my heirs in the most tax-efficient manner? Do I need to establish a trust to provide for my spouse or other beneficiaries? How much money will my grandchild need for college? Do I need to provide for a child who has a disability?

Taking inventory of the assets may be the key when you make a will. Any items not specifically mentioned may be addressed in a catchall clause of your will called a residuary clause, which generally states, "I give the remainder of my estate to ..." Without this clause, items not specifically mentioned will be distributed in accordance with state law.

Outstanding debts usually will be paid by your estate before your beneficiaries receive their shares. You may want to clear up debts that you know will be a problem, or make specific provisions for payment of those debts in your will.

Remember to be specific and clear when naming beneficiaries. For example, state the person's full name as well as his/her relationship to you (child, cousin, friend, etc.) so your executor will know exactly who you mean. Clarity also helps prevent challenges to your will.

States require you to sign the will in front of witnesses. A witness should not be a beneficiary under the will. Only one copy should be signed.

You'll probably need to update your will several times during the course of your life. For example, a change in marital status, the birth of a child or a move to a new state should all prompt a review of your will. You can update your will by amending it by way of a codicil or by drawing up a new one. Generally, people choose to issue a new will that supersedes the old document. Be sure to sign the new will and have it witnessed, then destroy the old one.

What is a living will?
A living will is not a part of your estate will. It is a separate document that lets your family members know what type of care you do or don't want to receive should you become terminally ill or permanently unconscious. It becomes effective only when you cannot express your wishes yourself. If your state recognizes a power of attorney for health care, have one executed to authorize someone to act in accordance with your present intentions.

Discuss your wishes as reflected in your living will with family members, and be sure they have a signed copy.

Learn more about managing your personal finances.