Top 5 Key Ingredients in Will Preparation
by Rachel Drude-Tomori on November 25th, 2019 in Estate Planning Law, Wills, Trusts and Probate
A Last Will & Testament is a fundamental part of any comprehensive estate plan; likewise, will preparation is one of the most basic skills of a seasoned estate planning attorney. However, this does not mean that every Will is basic or simple: in fact, Wills can be quite complex depending upon the goals of the client and the size of the estate. Whether you are a high net worth individual or have a modest estate, here are the top five reasons everyone needs a Will:
1.) Select Someone Trustworthy to Administer Your Estate
Your Will should nominate at least one “Personal Representative” which is Florida’s terminology for “Executor.” Importantly, only Florida residents and certain family members are qualified to serve as Personal Representative under Florida law; in other words, a close friend who is not a Florida resident will not qualify as Personal Representative. Above all, choose someone who is:
- Financially literate; and
Many clients default to their eldest child as their first choice for Personal Representative. While this may work for some families, when the matriarch or patriarch of a family dies, very often repressed sibling rivalries and jealousy bubble up with the potential to dismantle even the most sophisticated estate plan. An experienced estate planning attorney will take the time to discuss not only the ideal qualities of a Personal Representative, but also your unique family dynamics and personalities to ensure you are setting your family up for success upon your demise.
2.) Identify Your Family Members and Other Beneficiaries with Specificity
At its most basic level, a well-drafted Will should describe the members of your immediate family tree, even if you are planning to exclude or “disinherit” one or more family members who would be entitled to an inheritance but for the Will. If all of your family members have predeceased you, it nonetheless is helpful to state that you are unmarried or widowed and, if applicable, that you do not have any children or that your children are no longer living, if this happens to be the case. This is helpful to your Personal Representative and his or her attorney to properly administer your estate and provide necessary legal notices to the appropriate parties.
3.) State Your Wishes Regarding Disposition of Your Remains
Your Will should include a statement regarding any specific wishes you have with respect to the disposition of your bodily remains. This section could include, for example:
- a statement that you wish to be cremated
- a statement that you wish to be buried
- a description of where you wish to be buried
- a reference to a prepaid funeral, burial, or cremation contract
- instructions regarding disposition of your ashes
- details regarding the contents of your obituary
- your wishes regarding funeral arrangements, music, invitees, etc.
Even if you utilize a revocable trust or beneficiary designations to avoid probate (discussed in more detail, below), you should nonetheless have a Will that provides instructions regarding how your body should be handled upon your passing, so that your loved ones can ensure your wishes are honored.
4.) Identify and Distribute Your Tangible Personal Property
Your Will should include a disposition of your tangible personal property, including, for example: motor vehicles, furniture, furnishings, collections, artwork, and jewelry. If a specific item of tangible personal property should be distributed to a particular beneficiary, this should be stated with specificity to ensure that your intent is fulfilled. Alternatively, if the primary vehicle of your estate plan is a revocable trust, your Will should include a valid “pour-over clause” directing your tangible personal property to the Trustee of your revocable trust for distribution according to its terms.
5.) Distribute Your Residuary Estate
A residuary clause directs the disposition of any property not specifically mentioned in other sections of the Will (i.e., it often serves as a “catch-all”). One of the most common mistakes in self-made or “DIY” Wills is the inadvertent omission of a valid residuary clause, which means the bulk of the client’s assets could be inherited by his or her default heirs at law, rather than the persons or organizations the client intended. Again, if the cornerstone of your estate plan is a revocable trust, your Will should include a valid “pour-over clause” directing your residuary estate to the Trustee of your revocable trust for distribution according to its terms. Even clients with properly funded revocable trusts must have a valid “Pourover Will,” to “catch” any assets that either were never transferred to trust or which flow to the estate post-date of death; most commonly, these situations involve significant refunds and wrongful death proceeds. For more on the benefits of revocable trusts, please visit: https://www.stpetelawgroup.com/frequently-asked-questions-revocable-living-trusts/
WHAT ASSETS ARE CONTROLLED BY MY WILL?
It is important to understand which of your assets are subject to probate and thus controlled by your Will. The general rule of thumb is that only assets titled in your sole name with no designated beneficiary are subject to probate and thus the terms of your Will. Assets which commonly are not subject to probate and thus not governed by a Will include:
Assets Titled as Joint Tenants with “Right of Survivorship”:
- For example, a husband and wife own their primary residence together as joint tenants with right of survivorship. If husband dies first, wife will simply continue to own the property by operation of law as the surviving joint owner; for chain of title purposes, wife need only record husband’s death certificate in the official records in the county where the property is located.
- Similarly, mother and daughter own a joint checking account with right of survivorship. Mother’s Will devises her residuary probate estate to both son and daughter. If mother dies first, daughter will simply continue to own the checking account by operation of law as the surviving joint owner. In this example, the terms of mother’s Will do not control the disposition of the joint account, and thus son has no right to the checking account by virtue of the Will.
Assets with “Pay-On-Death” or “POD” Beneficiaries:
- For example, father names son as “pay-on-death” beneficiary on his money market account. Father’s Will devises his entire probate estate to his longtime girlfriend. If father dies first, son will inherit the money market account as POD beneficiary; in this example, the terms of father’s Will do not control the POD account, and thus girlfriend has no rights to the account by virtue of the Will.
Assets with “Transfer-On-Death” or “TOD” Beneficiaries:
- For example, mother names charity as TOD beneficiary on appreciated corporate stock; her Will names her daughter as sole beneficiary of her probate estate. When a mother dies, the charity will inherit the stock; in this example, the terms of mother’s Will do not control the TOD stock, and thus daughter will have no rights to the stock by virtue of the Will.
Contractual Assets with Valid Designated Beneficiaries:
- For example, uncle names two nephews as 50/50 designated beneficiaries on his life insurance policy; his Will names charity as sole beneficiary of uncle’s residuary estate. When uncle dies, his nephews will inherit the insurance proceeds in equal shares; in this example, the terms of uncle’s Will do not control the beneficiary designated life insurance policy, and thus the charity will have no rights to the policy by virtue of the Will.
Assets Titled in Trust.
Importantly, assets titled in the name of a trust are not subject to probate; however, in some cases, assets titled in trust may be subject to the claims of estate creditors. For more on asset protection planning, please visit: https://www.stpetelawgroup.com/safeguarding-your-assets-from-creditors-lawsuits/
Why Have a Will If I Can Put Joint Owners or Beneficiaries on All of My Assets?
Here are some compelling reasons you should seriously consider before relying on joint ownership or beneficiary designations in lieu of a Will:
Immediate Access by the Joint Owner
Naming a joint owner on your financial accounts gives them immediate access to the entire balance. In other words, if mother names daughter as a joint owner on her checking account, daughter can withdraw the entire balance at any time without mother’s knowledge or permission.
Exposure to the Proposed Joint Owner’s Creditors
Naming a joint owner on your financial accounts or real estate can be extremely risky, especially if the proposed joint owner encounters a creditor issue, including, for example, a lawsuit, bankruptcy, or divorce. In other words, naming a joint owner exposes your assets to potential creditor claims of the joint owner. Even if creditor issues are not a major concern, there is always the possibility that the joint owner could predecease you, and thus your Will would direct the disposition of the asset by naming alternate beneficiaries in various contingent scenarios.
Interference with Homestead Exemption
Naming a joint owner on your primary residence can interfere with your Florida homestead and save-our-homes cap benefits for county property tax purposes, particularly if the joint owner does not use the property as his or her primary residence or lives out of state.
Certain categories of individuals should never be named as POD or TOD beneficiaries to inherit property outright. These include beneficiaries who:
- are under the age of legal majority (age 18 in Florida)
- are immature and/or bad or inexperienced at managing money
- are in a rocky marriage and thus prone to divorce
- have addiction issues, including both legal and illegal drugs and alcohol
- have special needs, such as autism or significant learning disabilities
- suffer from a disability and receive needs-tested government benefits, such as SSI and Medicaid
These are just the most common examples of beneficiaries who require special planning under the guidance of an experienced estate planning attorney. Additional considerations that may further justify a more complex Will include:
- blended families (or not-so-blended families)
- tax planning for estates that exceed the federal estate tax exemption
- assets located in more than one state or country
- special needs beneficiaries
Having a well-drafted and properly executed Will is essential to an estate plan that preserves your legacy, minimizes creditor exposure, protects your beneficiaries, and ensures that your wishes are honored. For more on the probate process, please visit: https://www.stpetelawgroup.com/frequently-asked-questions-probate-guardianship/