A Will is the Way to Have Your Wishes Followed

Individuals often do not make or appropriately update wills because they wrongly believe they aren’t necessary, but the will is the place for your wishes.

A will, also known as a last will and testament, is one of three documents that make up the foundation of an estate plan, according to The News Enterprises’ article “To ensure your wishes are followed, prepare a will.”  Two other very important documents are the Power of Attorney and a Health Care Power of Attorney. These three documents all serve different purposes, and work together to protect an individual and their family.  Today I’ll focus on the will and its important for conveying your wishes for your assets.

In our practice, we often encounter situations where a person passes away either without a will or without updating their existing will, both of which can lead to tragic results.  Assets will often go to unintended beneficiaries with far greater cost, difficulty and time.

There are a few situations where people may think they don’t need a will, but not having a will or updating it properly can create complications for the survivors.  Here are a few instances where people mistakenly believe they do not need a will.

First, when spouses with jointly owned property don’t have a will, it is because they believe that when the first spouse dies, the surviving spouse will continue to own the property. However, with no will, the spouse might not be the first person to receive any property that is jointly held, and it is especially true that the spouse may not be the first person to receive individually jointly owned property, like a car.  Even when all property is jointly owned—that means the title or deed to all and any property is in both person’s names –upon the death of the second spouse, an intestate (meaning no will) proceeding may have to be brought to court through probate to transfer property to heirs.

We frequently encounter situations where an executor will say that the decedent told them what they want, and that it does not match the will.  Or even worse, a decedent will have an old will that no longer reflects their wishes, such as not updating a will after getting married. In these situations, the will controls the property, even though the wishes are now wrong. It is critical to update your will with changes to make sure that the will conveys your estate to the beneficiaries you want.

Secondly, any individuals with beneficiary designations on accounts transfer those accounts to the beneficiaries on the owner’s death, with no court involvement. The same may apply for POD, or payable on death accounts.  In Texas you can even go so far as to name a beneficiary specifically on your deed or car title.  If the beneficiary named on any accounts has passed, however, their share will go into your estate, forcing distribution through probate.  Beneficiary designations also don’t adequately plan for successors, incapacity of beneficiaries and sometimes don’t allow many beneficiaries.   Clients often try to avoid probate on their own by the use of beneficiary designations, but we often have to open estate administrations where they are incomplete or ineffective for the above reasons.

Third, people who do not have a large amount of assets often believe they don’t need to have a will because there isn’t much to transfer. Here’s a problem: with no will, nothing can be transferred without court involvement. Let’s say your estate brings a wrongful death lawsuit and wins several hundred thousand dollars in a settlement. The settlement goes to your estate, which now has to go through probate.

Fourth, there is a belief that having a power of attorney means that they can continue to pay the expenses of property and distribute property after the grantor dies. This is not so. A power of attorney expires on the death of the grantor. An agent under a power of attorney has no power, after the person dies.

Fifth, if a trust is created to transfer ownership of property outside of the estate, a will is necessary to funnel unfunded property into the trust upon the death of the grantor. Trusts are created individually for any number of purposes. They don’t all hold the same type of assets. Property that is never properly retitled, for instance, is not in the trust. This is a common error in estate planning. A will provides a way for property to get into the trust, upon the death of the grantor.  This is called a pour over will.  See here for more details.  https://www.galliganmanning.com/i-have-a-trust-so-why-do-i-need-a-pour-over-will/

With no will and no estate plan, property may pass unintentionally to someone you never intended to give your life’s work to. Or, having an out of date will that doesn’t reflect your wishes may direct property to someone you no longer wanted to benefit.  Having an up to date will lets the Executor know who should receive your property. The laws of your state will be used to determine who gets what in the absence of a will, and most are based on the laws of heirship. Speak with an estate planning attorney to create a will that reflects your wishes, and don’t wait to do so. Leaving yourself and your loved ones unprotected by an up to date will, is not a welcome legacy for anyone.

Reference: The News Enterprise (September 22, 2019) “To ensure your wishes are followed, prepare a will.”

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I have a Trust, so why do I Need a Pour Over Will?

Even if you utilize a trust in your estate plan, it is essential to have a “pour over will” that directs assets at your death to your trust through probate.

If the goal of estate planning is to avoid probate, it seems counter intuitive that one would sign a will, but the pour over will is an essential part of some estate plans, reports the Times Herald-Record’s article “Pour-over will a safety net for a living trust.”

If a person dies with assets in their name alone and without some contractual beneficiary which avoids probate (e.g. life insurance) those assets go through probate. The pour over will names the trust as the beneficiary of probate assets, so the trust controls who receives the inheritance. The pour over will works as a backup plan to the trust, and it also revokes past wills and codicils.

Living trusts became more widely used after a 1991 AARP study concluded that families should be using trusts rather than wills. Trusts were suddenly not just for the wealthy. Middle class people started using trusts rather than wills, to save time and money and avoid estate battles among family members. Trusts also served to keep financial and personal affairs private. Wills that are probated are public documents that anyone can review.  See here for more details.  https://www.galliganmanning.com/how-do-trusts-work-in-your-estate-plan/

The one downfall to a trust is that it must be properly funded to work right.  As I said earlier, you probate assets in your name that do not pass by contractual obligation.  So, the trust must either own assets itself (“funding it”), have assets pass to it (e.g. the life insurance pays to the trust) or you must have some other mechanism for an asset to get to the trust or beneficiaries, such as a “joint tenants with rights of survivorship” account.  The pour over will is the safety net that makes sure if you missed something or obtained an asset you didn’t expect, there is still a way to get that asset to the trust and ultimately to your beneficiaries after death.

Speak with an experienced estate planning attorney to talk about how probate may impact your heirs and see if they believe the use of a trust and a pour over will would make the most sense for your family, and how best to fund the trust to accomplish your goals.

Reference: Times Herald-Record (Sep. 13, 2019) “Pour-over will a safety net for a living trust.”

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Estate Planning Without Children: Issues to Consider

Planning without kids
Estate planning without children is just as important, if not more important, then estate planning for couples who do have kids.

Estate planning without kids is very important and raises unique issues to address.  If you and your spouse don’t have children, the focus of your financial legacy may be quite different from what it would be if you were parents.  In fact, due to changing demographics, families often have less children than before or no children.  However, couples often ignore planning as they think they do not need to plan without kids.

Motley Fool’s article, “5 Estate-Planning Tips for Child-Free Couples,” suggests that you may want to leave some of your money to friends, family members, charitable organizations, or your college. No matter the beneficiaries you choose, these estate planning tips are vital for couples without children.

  1. A will. You need a will because couples without children don’t have natural heirs to inherit their wealth. If you die without a will, your assets also may not go to your spouse. The state intestacy laws determine which of your family members inherit from you, especially if neither of you have wills. The family of the first spouse to die may be disinherited.  All of this can be eliminated by having a will directing your inheritance to beneficiaries of your choosing.
  2. A power of attorney. Who will make financial decisions for you, if you and your spouse become incapacitated? You can select a person to do this with a power of attorney (POA). You can name a person to pay bills, manage your investments and handle property matters, if you’re unable to do so yourself.  Failing to do so may require an expensive guardianship.  You also very much need medical powers of attorney so that someone you know can make medical decisions for you if you and your spouse cannot.
  3. Up-to-date beneficiaries. If you have retirement accounts or life insurance policies, the distribution of the proceeds at your death is made by a beneficiary designation, not by your will. A frequent beneficiary error is not keeping those designations current.
  4. Give money to charity now. You may think about leaving your assets to organizations that have enriched your life. You can set up a trust to be sure that your money goes where you want. Work with an experienced estate planning attorney to accomplish this.
  5. Remember the pets. If you have furry children, plan for their care when you’re not around to tend to them yourself. You can also put money into a trust specifically intended for the animal’s care or designate an organization that will provide lifetime care for your pet with money you earmark to that purpose as well as name a caretaker to care of the pet after you are both gone.

Remember that estate planning without children is needed just as much as planning for couples with children, and maybe even more.  Considering these issues will help ensure you are protecting in your own estate plan and your inheritance goes to the beneficiaries you choose.

Reference: Motley Fool (September 9, 2019) “5 Estate-Planning Tips for Child-Free Couples”

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