Why There Is No Simple Will
With software programs today like LegalZoom and doyourownwill.com, consumers might get the idea that anyone could prepare a Will. Truth be told, almost anyone can prepare a Will. Whether it will accomplish the objectives of the person drafting it is another matter. Usually people want to know that their assets will pass to the people they want to receive them, that they will pass with the least amount of taxes, and, if possible, with the least amount of administrative time and confusion.
Taking the simplest set of facts where there are a husband and wife who have never been married before who have adult children living independently and there are no special needs in the family, the Will when seen in this light is still not simple. Here is why.
1. Not everything passes by Will. More than half the assets in the United States do not pass by Will. This may seem to be an astonishing statement considering the emphasis placed on Wills until you think about the types of assets. Retirement accounts, your IRA’s, 401(k)’s, 403(b)’s and similar assets pass by beneficiary designation without reference to the Will at all unless your estate is made the beneficiary. Property in a Revocable Living Trust or in an Irrevocable Trust does not pass by Will. Life insurance goes by beneficiary designation no matter what the Will says unless the Will leaves the life insurance to your estate. POD (Payable on Death) and TOD (Transfer on Death) assets pass to the person or persons designated. Property titled as Joint Tenants With Right of Survivorship and also property titled as Tenants by the Entireties pass to the survivor directly without any reference whatsoever to a Will.
When you redo your Will, you need to look not just at the assets that pass by Will but all your assets regardless.
Titling and beneficiary designations are critical. Usually, the house is in joint name and the spouse is named as beneficiary of life insurance and retirement assets but this does not answer the question. This is why.
2. Beneficiary designations need to look beyond your spouse. You need to name backup beneficiary designations for IRA’s and other retirement assets as well as life insurance. These backup beneficiaries will inherit after both the husband and wife have died and will usually be the children equally but, suppose one of the children dies before you do. Do you want that child’s share to go to his or her children “per stirpes” or to be divided equally among your surviving children? It makes a major difference both for beneficiary designations and in Wills.
Sometimes retirement assets could unintentionally be inherited by your estate if your spouse died before you and you have now passed away. In that case, the taxes on that account will most often be substantially higher than they would have been if you had named individuals as beneficiaries.
3. You need to name who is to administer your estate and trustees for under-age children. You might name your oldest child as Executor or all together. This deserves a discussion. One child could be bad with money. Several children could instigate an unnecessary dispute.
If you have grandchildren and your child dies young, should the fund for your grandchildren to be handled by their widow or widower or by the Executor of the estate and do you want to designate how these should be used and when they should inherit?
4. The circumstances might not be as simple as you think. If you have a grandchild with special needs who is receiving government benefits through Medicaid and that child inherits outright under your Will instead of through a properly drafted Supplemental Needs Trust, your grandchild might be in a worse position than if he never inherited because he could lose his benefits. If you are in a second marriage and want your children by a prior marriage to inherit, you are going to need to set up the structure in advance to take care of them. If you have an adult child who lives with you, you will need to think through how you want the house to be handled after your deaths. If you are a widow or widower and retitle your accounts jointly with one of your children, you might unintentionally disinherit others.
Thinking through the problems is all part of the planning.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.