What You Shouldn’t Put in your Will

We often talk about different estate planning vehicles, such as use of trusts versus a will, and frequently about what types of provisions and powers should be including in your estate plan.  Today, I’m going to change that.  Let’s talk about what you shouldn’t put in your will, or at least, not without a lot of thought and care.  A recent article from Best Life titled “Never Include These 2 Things in Your Will, Experts Warn.” was the inspiration, but I had some different ideas.

As a quick point, I’m examining specifically what you shouldn’t have in a will.  Most of this would be applicable to trusts as well, with some caveats.

  1. Conditional gift in your will.

One thing you shouldn’t put in your will is a conditional gift.  A conditional gift is when money or property is given only when and if a specific event takes place. For instance, grandpa might leave a conditional gift for his grandchild, if she graduates college, gets a job, or gets married. These provisions are often drafted in the hopes of encouraging or discouraging certain behaviors and have a tendency to get messy.

Even the seemingly basic condition of graduating from college can turn into a major issue, if the beneficiary decides to pursue a trade or accelerates in college and is offered an excellent job before earning her degree.  Not all programs are the same, and some colleges have 5 year undergraduate programs that tie into professional services.   The cost of obtaining the inheritance may not be worth it.

Similar obstacles—and, frequently, creative workarounds from beneficiaries who want to unlock their inheritance—will also be encountered with other conditional gifts. However, there are still ways to achieve the spirit of the conditional gift without it getting complicated. Instead, give the bequest outright without any conditions but include the encouragement that the beneficiary does something specific.

Another option is to hold the gift in a trust for a beneficiary. With a trust you can designate a trustee to be in control of the assets in the trust after your death. The trustee will have discretion as to the timing and amount of distributions. You can also detail how narrow or broad that discretion should be, perhaps detailing that you hope it will be for college education.

See here for more ideas on that front:  https://www.galliganmanning.com/how-grandparents-can-help-pay-for-college/ 

  1. Be careful with dollar amount bequests.

The article suggests that you should never include a specific dollar bequest.  I disagree that clients should never include specific dollar bequests, but I have encountered many, many estates where they are problematic, so I’m going to address it.

Specific dollar bequests often create disparate giving compared to the rest of the estate.  What I mean by this is that when you come up with the estate plan, perhaps you had $500,000 and a house, and for an easy (but not very realistic) example, let’s assume that it is all cash in a bank account.  You leave $20,000 to each of your grandkids and you had 4 at the time you prepared the plan.  As you expected it, you were giving $80,000 out of your $500,000 cash, and the rest goes to your kids (so, $420,000 for them).

Fast forward to the time the person passed.  After a long-term care stay, unfavorable stock market, enjoying their retirement and the birth of 3 more grandkids, they now are at $250,000.  So, $140,000 will go to grandkids, and $110,000 goes to the kids.  Based upon where we started, the testator likely didn’t want the grandkids to get so much more than their kids.

Even further, and this is a more common problem, is that people who use wills often have non-probate assets as part of their estate plan.  When they formulate their plan, they are thinking of the whole value of their estates, regardless of whether the will controls them or not.

So, going back to my prior example, let’s assume the $500,000 cash is actually $300,000 in IRA, $150,000 in investments for which there is a transfer on death beneficiary at the suggestion of the banker and $50,000 in cash in a bank account.  After the person dies, regardless of whether they have more grandkids or not, only the $50,000 is part of their estate plan as the IRA and investment account pay directly to their beneficiaries.  The executor doesn’t control them.  So, how does the executor pay out the $20,000 per grandkid?  Maybe sell the house?

A better option in many cases is to use percentages. In this way, your estate will self-correct for size and each beneficiary will get their proper share.  One caveat is that I disfavor that with charitable beneficiaries, but that’s its own article.

  1. Burial Provisions

There are some states where this is still relevant, but in most places you shouldn’t put burial provisions in your wills.  It’s true that it used to be that way, but over time lawyers identified a common problem.  Wills might have been left with the drafting attorney, or in a safety deposit box, or generally not found until after the person passed and was buried.  If the will said “I want to be cremated,” it was kind of too late.

Instead, many states, including Texas, provide for individuals to name a person to execute your final wishes and to include what those wishes are.  These are called appointments for the disposition of remains, and work very well as standalone documents you can share with your agents for when the time comes.

  1. Listing Property

This isn’t a problem so much as it is unnecessary or potentially confusing, but wills shouldn’t list what you own.  I typically see this in handwritten or DIY wills, but there is no reason to list what you own. In fact, it is better not to as the will is designed to work as a catch-all.  It is supposed to control and direct any of your assets remaining at death unless a contract already directs them, such as non-probate assets like retirement accounts and insurance which pass by contract.

It may also cause confusion, because if you miss something or if you list values and the values change, an executor or beneficiary might think the will only applies to that property, as opposed to everything else.  So, no need to list property or limit it in any way.

Every will is specific to the person who creates it. In order to ensure that yours is done properly, meet with an experienced estate planning attorney to create a will that benefits you and your loved ones—without any unexpected problems.

Reference: Best Life (March 20, 2022) “Never Include These 2 Things in Your Will, Experts Warn”

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What are the Duties of an Executor?

Many clients struggle with who can serve as an executor for their estate plan.  They may not have an easy option amongst their family, and are hesitant to ask others to serve as executor.  Many times clients want to know what are the duties of an executor so they can convey that to a potential candidate for the role.  It isn’t easy to explain everything an executor needs to do as they have to react to the circumstances as the time, but there are some general steps they will address.  A recent US News article entitled “How to Prepare to Be an Executor of an Estate” takes a further look into what is expected of an executor.

First, keep in mind that an executor is the person who helps wrap up the finances, assets and affairs for a deceased person. An executor is a person named in a will, and that is the scenario I’ll address.  If you are using trusts, many of the steps will overlap.

As executor of an estate, you will need to get copies of the death certificate and the will, and take both to an attorney well versed in probate law.  That attorney can help you probate the will through court.

Once appointed, you will follow the instructions in the will to administer the estate.  As executor, you are acting in a fiduciary capacity, and your efforts are directed toward the interests of the beneficiaries of the decedent’s the estate.

You will identify the assets of the estate, determine their value, pay off any valid debts, close accounts like utilities and cable or phone plans and distribute money and possessions to beneficiaries.  Depending on the terms of the will and the situation, you’ll have to file tax returns, make tax elections, and potentially sell property and the like.  You may also establish trusts for beneficiaries, or make arrangements to deliver assets such as personal property, real property, vehicles and more.

The duties of an executor also include reporting what assets they found in the estate through the filing of an inventory, to notify creditors or other essential parties.  Attorneys help with this process to ensure compliance with state laws.

The time required to be an executor can be extensive.  Any court process is not a fast one, and for that reason many clients choose to avoid it through the use of trusts in their plans.  Trusts do not require a court process and can be far more immediate for the family.  As I said before, the duties of an executor overlap with the trustee, so the issues for consideration when picking a trustee are similar.   You can see this article for more detail on the differences.  https://www.galliganmanning.com/the-difference-between-an-executor-a-trustee-and-other-fiduciaries/ 

Finally, executors may be compensated for their work. Some states have commission schedules listed in their statutes that the executor can collect, while other states require that you keep track of your time and the judge will authorize “reasonable” compensation for your actual efforts.

Ask for help if tasks seem overwhelming or you do not understand certain instructions on accounts or the will. An experienced estate planning attorney can assist.

Reference: US News (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

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Common Wealth Transfer Mistakes

A legacy plan is a vital part of the financial planning process, ensuring the assets you have spent your entire life accumulating will transfer to the people and organizations you want, and that family members are prepared to inherit and execute your wishes.  However, four common errors can derail this wealth transfer, and send individuals, families, and their legacies, off track.  Kiplinger’s recent article entitled “4 Reasons Families Fail When Transferring Wealth” explains further.

Failure to create a plan. It’s hard for people to think about their own death and the process can be intimidating. This can make us delay our estate planning. If you don’t have the appropriate estate plan in place, your goals and wishes won’t be carried out. So, it is important to have a legacy plan in place to ensure proper wealth transfer. A legacy plan can evolve over time, but a plan should be grounded in what your or your family envisions today, but with the flexibility to be amended for changes in the future.  See this article for an idea of how wealth transfer works in an estate plan and how to get the process started.  https://www.galliganmanning.com/how-to-begin-the-estate-planning-process/

Poor communication and a lack of trust. Failing to communicate a plan early can create issues between generations, especially if it is different than adult children might expect or incorporates other people and organizations that come as a surprise to heirs. Bring adult children into the conversation to establish the communication early on. You can focus on the overall, high-level strategy. This includes reviewing timing, familial values and planning objectives. Open communication can mitigate negative feelings, such as distrust or confusion among family members, and make for a more successful transfer.

Poor preparation. The ability to get individual family members on board with defined roles can be difficult, but it can alleviate a lot of potential headaches and obstacles in the future.  This is critical for wealth transfer in roles such as executors, trustees and agents.

Overlooked essentials. Consider hiring a team of specialists, such as a financial adviser, tax professional and estate planning attorney, who can work in together to ensure the plan will meet its intended objectives and complete a wealth transfer in accordance with your wishes.

Whether creating a legacy plan today, or as part of the millions of households in the Great Wealth Transfer that will establish plans soon if they haven’t already, preparation and flexibility are essential elements to wealth transfer success.

Create a legacy plan that is right for you, have open communication with your family and review philosophies and values to make certain that everyone’s on the same page. As a result, your loved ones will have the ability to understand, respect and meaningfully execute the legacy plan’s objectives.

Reference: Kiplinger (Aug. 29, 2021) “4 Reasons Families Fail When Transferring Wealth”

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