Friday March 22, 2019
Wills - Good and Bad
Where is the Missing Will?
More than 40 wills were submitted to the probate court, with a multitude of potential heirs each claiming to be the true recipients of the estate of
Business Owner who passed away in 1976. With a $2.5 billion estate at stake, there was intense interest in the decision of the court.
After extensive review of the 40 documents, the court finally determined that none of the 40 wills were valid. Because there was no valid will, the court
divided the $2.5 billion estate among 22 relatives. Court costs, attorney costs and estate taxes were enormous, but the 22 heirs still each received
millions of dollars.
Why is a Will Important?
There are at least seven reasons for creating a will. A "peace of mind" estate plan starts with your will. The will passes your property to family, friends
and favored organizations, could direct distribution of a recent inheritance, may fix errors in living trust funding, allows you to select a guardian,
enables you to disinherit a child or other relative, permits you to select your executor and may help with a simplified probate.
1. Transfer of Property: There are some types of property that are best transferred by will. Many types of personal assets are difficult to
transfer through a living trust or are not appropriate for a "pay on death" transfer. Because vehicles and other personal assets are likely to be bought and
sold, it is much easier to keep vehicles, furniture, collections and other items in the probate estate and transfer them by will.
2. Potential Inheritance: You might be planning to receive an inheritance from a parent or other relative, but the inheritance could be
delayed by the probate process, potential estate issues or other reasons. Therefore, when you finally receive title to the property, there may not be a
convenient time or opportunity to transfer the assets into a revocable living trust. As a result, the inheritance will form part of your estate.
There also have been cases in which a person passes away in a tragic accident. The estate may receive an insurance settlement or a claim under a wrongful
death action. These assets would become part of the probate estate and are transferred under the residuary clause of your will.
3. Living Trust Errors: A living trust is a very appropriate way of avoiding the probate process. However, in too many cases a person has a
valid living trust but has not properly transferred the real estate, securities accounts or other assets to the trust. As a result, the property that has
not been legally transferred to the trust will be part of the probate estate covered by your will.
4. Guardian for Minors: The selection of a guardian for minor children is done through your will. Most states do not permit you to use a
living trust (there are a few exceptions) for this purpose, so it is very important to designate the guardian in your will. When you create the will and
designate the guardian of the person, it is also quite common to establish a family trust for the minor children and appoint the trustee.
5. Disinherit Someone: It is possible to disinherit a child or other heir. The appropriate place to explain that disinheritance or explain
why the inheritance is a nominal amount (such as $1.00) is in your will.
6. Select the Executor: Your executor is a key person for a successful estate property transition. The executor will inventory your estate,
advertise for creditors, pay bills and taxes, submit your will to the probate court and obtain the court's approval for the final distribution. Your will is
the document in which you will name your executor. Even if you have a revocable living trust with a trustee and a successor, it is essential to select an
executor who will manage your probate property.
7. Simplify Probate: In many states it is possible for people who pass away with modest to moderate resources to have a simplified or
summary probate. This permits your executor to manage your property and make distribution of it with very minimal contact with the probate courts. For
example, California allows many estates with assets valued under $150,000 to use a simplified probate process. The executor will follow the directions in
your will and distribute your property accordingly. In most cases, this will simplify administration and reduce your estate costs.
Good and Bad Wills
As was the case in the estate of Business Owner, there are many submitted wills that are not deemed valid or legal. In order to have a valid or legal will,
you need to comply with the state law requirements for wills. While there is some variation between the states, most states will follow several
1. Legal Age: In most states you must be 18 years old to sign a will.
2. Sound Mind: As we become more senior, we do not have as clear a mind as we had back in our youth. Most states permit you to create a
will if you have "lucid intervals," understand the nature of your property and the fact that the will is going to direct the transfer of that property to
your selected recipients.
3. Typed or Printed: A will normally is either typed or printed. While some states permit handwritten or other types of wills, the vast
majority of wills will be typed or printed and will contain at least one substantive transfer of property.
4. Date and Sign: Your will must be dated and signed. The date is essential in order to make certain that this is your final will. Many
individuals might write and sign two or more wills during a lifetime. Only your final will is going to be used by the probate court to distribute your
5. Witnesses: Under your state law, you will need to sign your will in the presence and hearing of two witnesses. Your witnesses must be
adults who are of sound mind and should not be beneficiaries under the will. They need to be told that this is a will, but you do not need to disclose the
contents of your will to the witnesses.
6. Self-Proving Will: In some states, it is permissible to have a notary or an affidavit witness form in which the will is either notarized
or the person pledges under perjury that this is a valid will. If the will is "self-proved," it will simplify the probate process. Ordinarily, the witness
is not required to testify in the probate court with a self-proved will.
Published October 26, 2018
Wills - Perils of Probate
IRA and 401(k) Designated Beneficiary Options
IRAs - Regular and Roth
401(k) Retirement Plans