Estate planning attorneys regularly receive inquiries from potential clients asking how much a ‘simple will’ costs. But a basic last will and testament cannot accomplish every goal of estate planning; and often cannot even accomplish the most common goals. This fact often surprises people who are going through the estate planning process for the first time. A basic will allows you to determine who will directly inherit your probate property and who will be appointed as the Personal Representative or Executory handling the probate process of your estate. A basic will does not avoid the probate process, control your non-probate property, or provide for any special planning concerns, such as estate taxes or trusts. The will is just one piece of the Total Estate Planning picture.
Do you have a pension plan, 401(k), life insurance, a bank account with a pay-on-death directive, or investments in transfer-on-death (TOD) form? When you established each of these accounts, you designated at least one beneficiary of the account in the event of your death. The named beneficiaries will inherit these accounts upon your death outside of any probate process. You cannot use your will to change or override the beneficiary designations of such accounts. Instead, you must change them directly with the bank or company that holds the account.
Joint Tenancy with Right of Survivorship
Do you own a house with someone “in joint tenancy”? “Joint tenancy” is the most common form of house ownership with a spouse. This form of ownership is also known as “joint tenancy with right of survivorship,” “tenancy in the entirety,” or “community property with right of survivorship.” Similarly, bank accounts and other property can also be owned jointly. When you die, your ownership share in property owned jointly passes directly to the surviving joint owner. A provision in your will bequeathing your ownership share to a third party will not have any effect.
Estate Tax Planning
Do you expect your estate to owe estate taxes? A basic will cannot help you lower the estate tax burden on your assets after death. If you think your estate will be liable to pay taxes, you can take steps during your lifetime to minimize that burden on your beneficiaries. Certain trusts operate to minimize estate taxes, and you may choose to make some gifts during your lifetime for tax-related reasons.
Conditional Giving with Living or Testamentary Trusts
Do you want to place conditions on some of your bequests? Do you want to make sure the money left to your children is spent on college tuition and not a new sports car? Do you want to make sure your children do not inherit before they reach the age of 25? If you want your children or other beneficiaries to receive an inheritance only if they meet certain prerequisites or if you want to limit how your children or beneficiaries spend their inheritance you must utilize a trust, either one established during your lifetime (living trust) or one created through instructions provided in a will (testamentary trust).
Special Needs Trusts
Do you have a child or other beneficiary with special needs? Leaving money directly to a beneficiary who has long-term special medical needs may threaten his or her ability to qualify for government benefits and may also create an unnecessary tax burden. A simple vehicle called a special needs trust is a more effective way to care for an adult child with special needs after your death.
The idea of a simple will is very appealing, but the will is just one piece of the entire puzzle and a simple will alone rarely meets the most common goals of estate planning. If you are ready to get your affairs in order, contact us today to schedule your Personal Strategy Session.