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.