A simple Will is a good start for your estate plans, but it may not be enough for your needs. When you use a Will to leave your assets to loved ones, you trigger the probate process, which can mean administrative headaches and delays before your named executor is able to deliver anything to them not to mention exposing all your assets to your creditors for collection.
Probate can often draft out for more than a year after your death and eat up a percentage of your estate in the payment of probate taxes, court administrative fees, and legal fees if you need an attorney to assist you during the probate process.
While your family may not be able to avoid probate altogether, you can reduce the number of assets that must pass through a Will (therefore, through probate) with other types of estate planning tools.
Why a simple Will is not enough
In many circumstances, a simple Will is not the best tool to use for an estate plan, no matter how small your estate may be due to the paperwork burdens and pitfalls related to the demands of creditors against the assets passing through your Will. Of course, if you have a larger estate of complex assets (like owning your own business), then a Will and the probate process are often the worst option for your estate plan.
Many individuals do not realize that they can avoid many of their assets passing through their Will. For example:
- Beneficiaries designations. If you have a pension plan, 401(k), or life insurance, the beneficiaries you designated at that time will inherit these accounts upon your death. This cannot be overridden by a Will no matter what you say in your Will. If you want to change your beneficiaries, you must be changed directly with the account provider. If you truly want these types of assets to pass through your Will, you need to put “my estate” as your beneficiary instead of a person. However, then 100% of those assets will be subject to probate taxes, paperwork delays, exposure to your creditors, and possibly taxes.
- Joint tenancy and other jointly-owned assets. If you own a house, bank account, or any other assets with a spouse or partner, that individual would receive full ownership upon your death. This also cannot be changed by a simple Will. The named survivor will take this outside of your Will entirely.
- Lowering estate taxes. If you expect your estate to owe taxes, a basic Will cannot reduce that tax burden for your beneficiaries. Rather, you’ll need to take steps during your lifetime to lower estate taxes, such as establishing trusts and making lifetime gifts.
- Conditional giving. If you want to establish any conditions for giving — for example, how your money will be spent, or at what age your beneficiaries can access those funds — a simple, basic Will is not suited to this goal. A Trust approach will be much more effective, and it can be established either during your lifetime (a living trust) or upon through a more complex type of Will which would contain a type of trust that is only funded by your executor after you die (called a testamentary trust). The pitfall of using a testamentary trust is that you again subject all your assets to the probate process and exposure to your creditors.
- Special needs trusts. If you have a child or beneficiary with special needs, leaving money directly to them in your Will can actually hurt them in the long run. Not only could it deem them ineligible for government benefits, but it could also create a significant and unnecessary tax burden. Establishing a special needs trust allows you to provide for an adult child or beneficiary after your death, without any of the downsides of leaving their funds in a simple Will.
Choose the right estate planning tools for your needs
While writing a simple, basic Will may appear to be the easiest solution for your estate plan, it’s likely not the only document you will need. Supporting your Will with additional estate planning tools can ensure that your estate is divided the way you intended, with minimal time in probate court and minimal burden on your loved ones.
Many states have also adopted new laws that offer wonderful alternatives to simple estate planning that do not involve a Will, such as the revocable transfer on death deed or the right through the DMV to assign a transfer on death beneficiary for your vehicle.
If you are still unsure which estate planning tools will best meet your needs, The Law Office of Patricia E. Tichenor is here to help. With our extensive experience in estate planning and probate matters, we can help you determine whether an estate planning tool like a trust is a better solution for you than just a simple Will. Schedule a free 30-minute consultation with us to discuss your circumstances.