What Your Last Will & Testament Will (And Will Not) Do—Part 2
August was “National Make-A-Will Month,” and if you have already prepared your will, congratulations—few Americans have taken this key first step in the estate planning process. In fact, only 33% of Americans have created their will, according to Caring.com’s 2022 Wills and Estate Planning Study.
While having a will is important—and all adults over age 18 should have this document in place—for most, creating a will is just one small part of an effective estate plan that works to keep your loved ones out of court and out of conflict. This series discusses exactly what having a will in place will—and will not—do for you and your loved ones. Last week, in part one, we looked at different benefits of having a will in place. In part two, we’ll detail the things that your will does not do, along with identifying the specific estate planning tools and strategies that make up for the potential blind spots that exist when your plan has only a will.
If you have yet to create your will, or you haven’t reviewed your existing will in a while, you can contact us to get the review or planning process started.
What A Will Won’t Do
While a will is a necessary part of most estate plans, it is typically a very small part of a thorough plan. Here are the things you should not expect your will to accomplish:
1. Keep your family out of court: Following your death, in order for assets in your will to be transferred to your beneficiaries, the will must pass through the court process known as probate. During probate, the court oversees the will’s administration, ensuring your assets are distributed according to your wishes, with automatic supervision to handle any disputes.
Like most court proceedings, probate can be time-consuming, costly, and open to the public. There’s also the chance that one of your family members might contest your will, especially if you have disinherited someone or plan to leave significantly more money to one relative than the others. Even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure.
If your estate plan consists of a will alone, you are guaranteeing your family will have to go to court if you become incapacitated or when you die. With active planning, it’s easy to ensure your loved ones can avoid probate using different types of trusts.
2. Pass on certain types of assets: Since a will only covers assets solely owned in your name, there are several types of assets that your will has no effect on, including the following:
Assets with a right of survivorship: Property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship, bypass your will. These types of assets automatically pass to the surviving co-owner(s) when you die.
Assets with a designated beneficiary: When you die, assets with a designated beneficiary pass directly to the individual, organization, or institution you designated as beneficiary, without the need for any additional planning. Common assets with beneficiary designations include retirement accounts, IRAs, 401(k)s, and pensions; life insurance or annuity proceeds; payable-on-death bank accounts; and transfer-on-death property, such as bonds, stocks, vehicles, and real estate.
Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity, so these assets cannot be passed in your will. This includes assets held by both revocable living trusts and irrevocable trusts.
3. Pass ownership of a pet and money for its care:
Because animals are considered personal property under the law, you cannot name a pet as a beneficiary in your will. If you do, whatever money you leave it would go to your residuary beneficiary who would have no obligation to care for your pet.
It’s also not a good idea to use your will to leave your pet or money for its care to a future caregiver. That’s because the person you name as beneficiary would have no legal obligation to use the funds to care for your pet. This person could legally keep all of the money and drop off your pet at a shelter.
The best way to ensure your pet gets the care you would want is to create a pet trust. We can help you set up, fund, and maintain such a trust, so your furry family member will be properly cared for when you’re gone.
4. Leave funds for the care of a person with special needs: There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs. You can easily disqualify someone with special needs for much-needed government benefits if you don’t use the proper planning strategies. A will should never be used to pass on money for the care of a person with special needs.
If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. These trusts can be complicated, and the laws governing them can vary greatly between states. We can help you make sure that upon your death, the individual would have the financial means they need to live a full life, without jeopardizing their access to government benefits.
5. Reduce estate taxes: If your family has significant wealth, you may wish to use estate planning to reduce your estate tax liability. A will is useless for this purpose. To reduce or postpone your estate taxes, you will need to set up special types of trusts.
6. Protect you from incapacity: Because a will only goes into effect when you die, it offers no protection if you become incapacitated and are no longer able to make decisions about your financial, legal, and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a guardian to handle your affairs, which can be costly, time-consuming, and traumatic for your loved ones.
There’s always the possibility that the court could appoint a relative as a guardian that you’d never want making such critical decisions on your behalf. The court could select a professional guardian, putting a total stranger in control of your life, which leaves you open to potential fraud and abuse by crooked guardians.
By establishing a trust, you can include provisions that appoint someone you choose—not someone the court chooses—to handle your assets if you are unable to do so. When combined with a well-prepared medical power of attorney and living will, a trust can keep your family out of court and out of conflict in the event of your incapacity, while ensuring your wishes regarding your medical treatment and end-of-life care are carried out as you intended.
Get Professional Support With Your Estate Planning Although creating a will may seem fairly simple, you should always consult with an experienced estate planning lawyer to ensure the document is properly created, executed, and maintained. There are many scenarios in which a will is not the right estate planning solution, and a will would not keep your family and assets out of court.
At our first meeting, we discuss in general terms your assets and learn about what’s most important to you, then we look at what will happen to your loved ones when you die or if you become incapacitated. We can work together to put in place the right combination of estate planning solutions to fit with your asset profile, family dynamics, budget, as well as your overall goals and desires.
We see estate planning as much more than planning for death or passing on your “estate” to your loved ones. It’s about planning for a life you love and a legacy worth leaving. Contact us today to schedule your first meeting to start the process of making sure your loved ones will be protected and provided for no matter what happens to you.
This article is a service of Jennifer Winegardner of Rayboun Winegardner, PLLC. We do not just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love. That's why we offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session.