Why A Basic Will Is Not Enough

Mark Wendell |

By Mark Wendell

(Authorship rights are shared with Tamara Harper, ESQ.)

There are a variety of basic tools from which you can construct your estate plan, including wills, life insurance policies, and trusts.  It is important to discuss this subject with your investment, tax and legal advisors as the application of these tools can be complex.

Wills are not only for the wealthy.  Properly executed wills are the foundation of most solid estate plans because they designate how and to whom your property will be distributed.  If you do not have a will, you give up your right to distribute your property as you wish. Wills are the primary documents for transferring wealth upon death. If you die without one, state law controls the disposition of your property.  In addition, without a will, settling most estates can be more troublesome – and more costly – for beneficiaries. Assets owned jointly or that have beneficiary designations, such as life insurance, annuities, transfer on death accounts, and retirement accounts, are not controlled by your will. However, they are included in your taxable estate for calculation of any applicable estate taxes due upon death.

The alternative would be that you create a trust document to provide a foundation upon which to build a solid predetermined structure for estate management, transference, and disposal following death.  This trust document method may be less costly, private, more organized, more tax efficient, and provide better protection for beneficiaries.

THREE MAJOR PROVISIONS THAT SHOULD BE INCLUDED IN A WILL:

  1. Guardian for your children.  A will should name a guardian for minor children in the event that you, your spouse or those that support them should die. Selecting a guardian requires careful thought; be sure the person you elect is willing and able to accept this responsibility.
  2. Creation of specific trusts.  A will directs the disposition of your estate.  To accomplish longer-term goals, such as funding a child’s education and/or their special needs or providing for elderly parents, you may need to include instructions for the creation of trusts at your death.
  3. Naming an Executor.  Your executor is your personal representative after your death.  He or she has several major responsibilities, including:  administering the estate and distributing assets to beneficiaries; making certain tax decisions; paying debts/expenses of your estate; ensuring all life insurance and retirement plan benefits are received; and filing necessary tax returns and paying appropriate federal and state taxes.

People often think they can use a “do-it-yourself” will.  Estate, probate, and tax laws are complicated, and, in most cases, only a lawyer experienced in these areas knows how to use the legal terminology designed to protect you and your interests. You should work with your attorney to develop a will that can protect you effectively.

BE SURE TO REVIEW YOUR WILL PERIODICALLY. IT MAY NEED REVISING IF:

  1. You move to a different state
  2. Your financial situation changes
  3. You add another dependent –  a child or aging parent
  4. You make a change in your life insurance
  5. Your heirs change marital status, have children, or die
  6. Your guardianship plans change
  7. You acquire property in another state
  8. You inherit or purchase property
  9. Your property increases substantially in value
  10. There are changes to current tax laws

To change a current will, consult with a lawyer.  A new will must be executed or an amendment must be placed.  It is not advisable to change your will by writing in or crossing out something. Changes made in this manner are meaningless, and may even void the entire will.

WHY A BASIC WILL IS NOT ENOUGH:

A will can be a good foundation for your estate plan because it outlines your wishes. It directs the disposition of personal belongings after you die and lets you designate a guardian for your younger or special needs children. But, a will does little to address how taxes affect your estate or how the courts will view your estate.  A trust document may address some of these concerns:

  1. In fact, relying on a will as your sole estate-planning tool can cost you much more than peace of mind and money. For example, if you pass away with only a will in place, your financial accounts may be frozen until the probate process is complete.
  2. The probate process may be lengthy, with your assets and bequests subject to the claims of heirs and creditors.  A trust document may provide some beneficiary protection.
  3. Probate and estate settlement costs may decrease the size of your estate.
  4. Your will is a public document, a trust document is not.
  5. Interpretations of wills can vary from state to state. For example, your will may be interpreted differently if you die in a state other than where it was originated.
  6. Your will may not control all your property (such as properties with joint tenancy titles and account beneficiary designations).
  7. Your will could be contested or easily and publicly challenged.
  8. Assets left to your spouse outside of trust structures are subject to federal estate tax upon his or her death (rates as high as 55% for assets above the current exclusion). Also, state inheritance or death taxes may apply.
  9. Should you become incapacitated or incompetent, a will cannot make provisions for your care and cannot protect your assets from others who may wish to take advantage of your unfortunate situation.
  10. A will is better than no document if properly drawn by an attorney.  However a trust document has many more provisions to plan for the proper and efficient disposition of your assets.  It can serve as the basis of a legacy by which you wish to be remembered.

Copyright © Mark Wendell and Tamara Harper 2012-2013-2014 All Rights Reserved

Tamara L. Harper, Esq.: is an attorney based in Westlake Village CA, specializing in asset protection, legacy and estate planning and trust administration.
Phone: 805-409-0530 Website: www.tamaraharper.com Email: tamara@tamaraharper.com