Estate planning is a critical process that ensures that your assets are distributed according to your wishes after you pass away. A will is an estate planning document outlining who gets what, who’s in charge and who cares for your children. According to Beck, Lenox and Stolzer Estate Planning and Elder Law, it’s a common misconception that drafting a will keep you out of probate. A will does not avoid probate; it merely acts as instructions for the probate judge. This article delves into why relying solely on a will can be inadequate and explores the essential strategies to create a more robust estate plan.
What Is a Will, and What Does It Do?
A will is a legal document in which you write down your instructions about what you want to happen to your stuff after you pass away and who will oversee distributing inheritances and managing the finances of your estate. If you have minor children, the will also allows you to designate a guardian to take charge of your children upon your death. The will is essentially your voice in the probate court, guiding the distribution of your estate.
The Probate Process: A Necessary Evil?
Probate is the judicial process through which your will is validated, and your assets are distributed under court supervision. This process is mandatory for wills. However, it’s time-consuming, public, expensive and strips away any semblance of privacy by making your estate matters part of the public record.
Will Your Loved Ones Know What to Do in Case of Your Incapacity?
A significant oversight of a will is its inability to protect you if you become incapacitated. Should you become unable to make decisions, a will offers no guidance for your medical, financial, or legal care, potentially leaving your family in a bind to seek court intervention.
A Will Can Lead to Vulnerability to Creditors and Legal Battles
Assets and property distributed through a will are exposed to creditors, lawsuits and even the beneficiaries’ poor decision-making. This exposure can lead to your hard-earned assets being diminished or lost entirely due to external claims or mismanagement.
What Assets are Not Covered by a Will?
It is crucial to recognize that not all assets can be included in a will. A will alone only transfers property in your name alone. Properties co-owned as joint tenants and assets that pass directly to a designated beneficiary by contract, like life insurance policies and retirement accounts, bypass the will and probate altogether.
How Beneficiary Designations Can Create Unexpected Outcomes
While naming beneficiaries on retirement accounts like IRAs and life insurance policies can avoid probate, it’s not without pitfalls. IRAs require careful consideration when designating beneficiaries. Factors like tax implications and the beneficiary’s age can significantly impact the distribution of the IRA. In addition, many people forget to review beneficiary designations regularly. Life events such as marriage, divorce, or the birth of a child can result in someone you didn’t expect receiving your money. Beneficiary designations must be carefully coordinated with your overall estate plan.
What about Adding Someone’s Name to a Real Estate Deed to Pass Property?
For homeowners, adding someone’s name to the deed does not sidestep probate; it only complicates matters. Another type of estate planning document, trusts, however, can ensure that real estate is transferred smoothly and privately, bypassing the probate process entirely.
Beyond the Will: Strengthening Your Estate Plan with Trusts
As outlined in the Forbes article, Which Is Best For Your Estate Plan: A Will Or Trust? wills and trusts are not exclusive but are often used together. Trusts are a powerful tool to circumvent the drawbacks of a will, offering a seamless transfer of assets outside of probate. They provide privacy, reduce estate taxes and can be structured to protect your estate from creditors and mismanagement.
Trusts fall into two main categories—revocable and irrevocable. The difference is as it sounds: the grantor can change the revocable trust after it’s created. Irrevocable trusts can’t be changed once established, unless all parties to the trust agree to the change. Working with an experienced estate planning attorney in your area will enable you to choose the best option for creating a comprehensive estate plan built for your circumstances.
Conclusion: The Comprehensive Approach to Estate Planning
While a will is an essential component of any estate plan, it is merely a starting point. A comprehensive estate plan should include a combination of wills, trusts and careful beneficiary designations to ensure that your assets are protected, your wishes are honored and your family is safeguarded from unnecessary legal hurdles. Remember, the goal is not just to plan for death but to prepare for any eventuality, ensuring peace of mind for you and your loved ones.
Frequently Asked Questions (FAQs)
What happens if I only have a will and become incapacitated?
Your family may need to petition the court to appoint a guardian or conservator to manage your affairs, which can be costly, time-consuming and stressful.
Can a will protect my assets from creditors?
No, a will does not protect your assets from creditors. Assets passed through a will are subject to claims by creditors, as well as potential lawsuits and divorce settlements against your beneficiaries.
Why is probate considered a disadvantage?
Probate is public, which means that the details of your estate become a matter of public record. It’s also often a lengthy and costly process that can deplete your estate’s value and delay asset distribution to your beneficiaries.
How does a trust differ from a will?
Unlike a will, a trust takes effect during your lifetime and can manage your assets in the event of incapacity. Trusts also allow your estate to bypass the probate process, offering privacy, speedier distribution of assets and protection against creditors and legal challenges.
Are all my assets covered by a will?
No, certain assets that are co-owned or have designated beneficiaries, such as life insurance policies and retirement accounts, are not covered by a will and pass outside of probate directly to the named beneficiaries.
How can I ensure my estate plan is comprehensive?
To ensure that your estate plan is comprehensive, consult an estate planning attorney to discuss your specific situation and goals. Your plan should likely include a combination of a will, trusts, powers of attorney, healthcare directives and carefully coordinated beneficiary designations to cover all aspects of your estate. Remember, a will does not avoid Probate! Click here for more information and to schedule a phone consultation with Jayson Lenox or Caroline Daiker Stolzer to discuss all your options.
