Summary
A will is a basic estate planning document that most individuals should have in their estate plan.
• Whatisawill?
• Limitations
• Will modifications
• Will substitutes”
Important: State laws vary
It is critical to note that state law varies on how wills are executed and interpreted. It is important that clients consult with their legal professional prior to executing any estate planning document.
What is a will?
A will is a document providing for an individual’s instruction for distribution of their assets upon death. The benefits of a will include:
• Appointment of a guardian for minors or special needs children,
• Creation of a trust for the benefit of family, friends, and/or charitable organizations, resulting in control of assets after death, and potential estate tax savings,
• Creditors are generally allowed a limited time to make claims against the estate, and
• Easy to establish.
Limitations when used as the only estate planning tool
Although a will can be very useful in helping individuals achieve their estate planning goals, it is rare that a will alone can accomplish all of one’s estate planning objectives.
A will cannot address incapacity, as a will is only effective at death. Additionally, a will must go through probate. Probate is a public, court supervised process in which wills are validated and estate assets are administered and distributed. Depending on the state, probate could be a timely and costly process. During probate, the decedent’s assets are generally frozen, and made unavailable to the family. Probate can also be costly, sometimes costing as much as 2% to 4% of a decedent’s estate.
Will modifications
In most states, an effectively executed will is generally valid until changed or canceled by the testator (individual who had created the will).
When a major life change occurs, your client should consider having their estate planning documents reviewed by their legal professional. Such changes include:
• Moving from one state to another,
• When a client’s money, property, or assets fundamentally changes, and
• When a client’s family changes through such events as birth, death, marriage, or divorce.
Will “substitutes”
Sometimes individuals will refer to alternative ways to transfer assets at death as “will substitutes”. This term can be misleading. Although there are ways to distribute property outside of a will, such as through life insurance, property held in joint name, and non-probate transfers, such as, beneficiary deeds, pay-on-death provisions, and transfer-on-death provisions, these types of transfers should not be considered as actual “will substitutes”. These types of transfers cannot achieve certain estate planning objectives, such as creating a trust for the benefit of the decedent’s family or appointment of a guardian for a minor or special needs child.
A will is almost always considered a key part of a client’s estate plan. Even when the client’s distribution of assets is primarily provided for in a trust, a will (often called a “pour over” will) can be used to “pour over” assets from the decedent’s estate (which may not have been held in the trust) into the trust after the decedent’s death.