While a Last Will & Testament is one of the most important estate planning documents you can have, there are things that it won’t cover. A Will is just one part of a comprehensive estate plan.
What is a Last Will & Testament?
A Last Will and Testament is a legally-binding statement directing who will receive your property after your death. It is also the way you appoint a legal representative to carry out those wishes. Without a Will your estate is distributed according to a statutorily prescribed scheme rather than as you might prefer. For example, notes Dionysios Pappas, an attorney with Vasiliadis Pappas Associates, “in Pennsylvania, the surviving spouse of a decedent who did not have a Will, and where the decedent is also survived by children, does NOT inherit the entire estate – something almost none of our clients want.” Also be aware, he adds, that “before a Will is recognized as binding, it must be submitted for review to the Register of Wills and approved to be in proper form and legally valid..” This process is referred to as “Probate”. Once a Will is probated, the “Executor” named in the Will, the person you selected with authority to distribute your property, must follow a complex set of rules and requirements applicable to distribution of your estate.
A Will doesn’t pass all of one’s assets
BUT DID YOU KNOW THAT A WILL DOES NOT TRANSFER ALL OF ONE’S PROPERTY ON DEATH? The following are examples of property you can’t distribute through a Will:
- Jointly held property. Property that is co-owned by a married couple, or that’s co-owned with another as “joint tenants with rights of survivorship”, is not distributed through the Will. If one joint tenant dies, his or her interest immediately ceases to exist and the other joint tenant automatically becomes the full owner “by operation of law”.
- Property in trust. If you place property into a trust, after death, the property passes to the remainder beneficiaries of the trust, not according to your Will.
- Life insurance. Life insurance passes to the beneficiary you name in the life insurance policy and isn’t affected by your Will.
- Retirement plan. Similar to life insurance, money in a retirement account (e.g., an IRA or 401(k)) passes to the named beneficiary. Under federal law, a surviving spouse is usually the automatic beneficiary of a 401(k), although there are some exceptions. With an IRA, you can name your preferred beneficiary.
- Investments in transfer on death accounts. Some stocks and bonds are held in accounts that transfer on death to a named beneficiary. These accounts will bypass probate and go directly to the beneficiary. Never designate securities as transferrable on death to named beneficiaries without first consulting your attorney.
What NOT to put in your Will
In addition to not being able to transfer certain types of property with a Will, there are other things that you cannot use a Will for. The following are examples of items that should not be included in a Will:
- Funeral instructions. A Will is not the best place to put your funeral instructions. Wills are often not found until days or weeks after death. It is better to leave a separate letter of instruction that is located in an easily accessible location.
- Special Needs children. Do not name as beneficiary a child with special needs. Receiving an inheritance can make the child ineligible for benefits; or the child’s disability may render him or her incapable of managing the inheritance. It’s usually better to name, instead, as beneficiary, a supplemental needs trust to provide for the child.
- Pets. A pet cannot inherit property. But you can give money to a caregiver to use for the benefit of pets. Special provisions should be included to ensure the fund is properly used.
- Conditional gifts. You may be tempted to make gifts conditional on the recipient’s behavior or actions. However, there are certain conditions that are not allowed. The condition cannot be illegal, such as being contingent on the marriage, divorce, or change of religion of the beneficiary. Moreover, even if the condition is legal, who will enforce it after your assets are distributed and the estate is closed?
George Vasiliadis, an attorney with Vasiliadis Pappas Associates aptly observes, “Wills are for what happens after you die. Powers of Attorney are for while you’re alive. What’s more important to you?” Planning for long-term incapacity is an essential component of retirement and estate planning. That means that, in most cases, in addition to having a Last Will & Testament, you should also have comprehensive legally compliant financial and health care powers of attorney. Many persons can also benefit from having a Trust. There are many different types of Trusts appropriate for a variety of situations.
As you can see, a Last Will & Testament is not the only component of an estate plan. Call the attorneys as Vasiliadis Pappas Associates to make sure your estate plan covers all your needs.