Why is Just a Will Not Necessarily Enough?
Most people are aware that having a will in place prior to their passing is a
good idea. And they are correct. However, just like a chef uses a variety of
ingredients and utensils to make a nutritious and enjoyable meal, an estate
plan needs many “ingredients” to create a plan that works for each individual
and family’s unique situation. Having only a will is like baking a cake but
forgetting to put in sugar. It may look beautiful when decorated, but when you
go to eat it, something is missing.
Consider the case of Helen, an independent farmer who
drafted a will in her late thirties after she had finished having children. As
her wishes had not changed, Helen never updated her will. When she passed away
forty years later, her children were horrified to discover that taxes and liens
from creditors took so much of the farm and its assets that Helen’s legacy was
rendered essentially valueless. Had Helen updated her plan regularly, she could
have saved the farm and kept it going for, perhaps, many generations. She also
could have helped her grandchildren—saddled with student loan debt—clear their
credit and start families of their own, unburdened. Instead, a treasure to her
family and the community was lost.
A will is simply a statement of intention to the
court. It only suggests where you want your assets to go and whom should serve
as your Personal Representative, the person in charge of handling your estate.
However, a judge must proclaim the will valid before it goes into effect and is
carried out. This process of declaring a will valid, is public and can be quite
lengthy. Especially if a beneficiary, or person who thinks they should be a
beneficiary, contests the will and challenges its validity.
Consider Robin Williams and his family. Much of the
fighting between his children and Robin’s wife was over sentimental
memorabilia, not to whom his large and valuable assets should go. Sometimes the
most contentious items are keepsakes cherished by a family regardless of their
value. Even if a person’s wishes are carried out as stated in their will, a
large part of their estate may be consumed in a lengthy legal battle regarding
their will’s validity due to disputes over items of relatively small monetary
value.
What Additional Documents Should Be Prepared to
Compliment My Will?
An estate plan can be tailored to prepare for a large
variety of unforeseen situations, with just a few additional documents. Take
Amanda for example. Amanda wants to keep her estate plan simple. As a working
mom, she doesn’t have a lot of time or the desire to create a complicated
investment strategy or do anything fancy. Plus, she and her husband, Eric,
don’t have a lot in savings. Amanda wants to get the minimum done before her
third child is born and then figure out a more detailed strategy later.
I might suggest that Amanda create the following
documents:
• Health
Care Proxy: Amanda can provide written guidance for Eric and her doctors about
what to do if she becomes incapacitated and what treatments she would like.
• Durable
Power of Attorney: This document would allow Eric (or any other trusted person)
to make legal decisions for Amanda, if she becomes incapacitated, i.e.
releasing funds from her bank account to pay for her children’s tuition or
selling her car.
• HIPAA
Release Form: HIPAA is a law designed to protect the privacy of patients. In
can be a double-edged sword, since it can prevent people like Eric or Amanda’s
mother from accessing her medical records and treatment information without
having to go through an elaborate process. The HIPAA Release bypasses that
mess.
• Will
and a Revocable Living Trust: These documents determine how Amanda wants her
assets allocated after she dies and provides instructions for her heirs. Best
practice is to have Amanda’s will direct that all her assets “pour over” into
her Revocable Trust (Revocable meaning Amanda can change its terms any time
before her passing).This bypasses much of the probate process, reducing legal
expense and court fees, and allows Amanda to gift her assets to whomever she wishes,
privately. Trusts are not part of the public probate process. Trusts also are
much more flexible than wills and allow the Trustee to manage property and
assets under a wide variety of guidelines set up to reduce estate taxes and
protect assets from creditors and children’s spouses, who may not always be a
part of the family. Furthermore, the Trustee, who is usually a trusted family
member or friend, can oversee any disputes between the beneficiaries, keeping
the fight out of the courts and away from the impersonal decisions of judges.
As you can see, with just a few more documents, an
estate plan easily becomes well-rounded and more prepared for life’s unexpected
surprises.
Aren’t Trusts Only For The Extremely Wealthy?
In a short answer, no. Trusts add depth and
flexibility to anyone's estate plan. There are many types of trusts. Many are changeable at any time, meaning
they can be amended or revoked depending on the circumstances. If we revisit
Amanda’s case from above, even though she does not have many assets, she does
have children. Couples with young children benefit greatly from having a trust,
as the trust is the vehicle to spell out how you want your children cared for,
whom should care for them, and how the money left them should be spent. Should
the money ever be mismanaged, your children would have better access to legal
redress against the trustee, unlike in a situation where money was simply left
outright to the children’s legal guardian. Trusts also can ensure that any
disabled child remains eligible for state and federal benefits while still
having access to their inheritance. The possibilities are endless, people have
even set up trusts for their pets. Regardless of your circumstance, a trust,
even a simple trust, can go a long way to rounding out your estate plan and
ensuring that the unexpected does not take you by surprise.
Peace of Mind
Whatever your situation, you can give yourself and your family peace of mind by consulting with an estate planning lawyer to determine if the plan that you have is sufficient to meet your needs and ensure that your wishes are carried out.
