“We did our estate plan – we had wills!” – far too often, this is what I heard from clients when I met with them after their loved one died. People often think they have everything covered as long as they have wills – no court, no questions, no conflict. After all, wills are the most common estate planning tool; we know them from television and movies and can envision the dramatic “reading of the will” (which rarely happens in real life).
But too often, relying on a will alone does not solve most estate planning needs, especially for families. Instead, using just a will to plan your final wishes can often leave your loved ones with an expensive and timely mess that does not end up distributing your assets the way you intended.
And a will definitely does not protect your assets for your children through adulthood. A will does not ensure that someone you trust can step right in and take care of you and your assets if you become incapacitated. And having just a will usually ensures that your family will need to go to court when you die.
A Will Does Not Apply to All of Your Assets or All of Your Needs
Your will actually only covers certain items, including property owned solely in your name and any accounts that do not have a beneficiary designation. This can be a good thing, since married couples often own everything jointly and name each other beneficiary, so the probate process is not sometimes needed when one spouse passes away.
But wills only applying to certain property can be a really, really bad thing, too. Any accounts that have a beneficiary designation, like 401(k)s, IRAs, annuities, and life insurance, pass to whomever you name as beneficiary. These accounts with beneficiary designations are completely separate from your will and any wishes or directives you have stated in your will. Because of this, it’s especially important to make sure your life insurance and retirement benefit beneficiaries are up to date and, more importantly, align with your estate planning goals.
For example, if you name your children as beneficiaries on your life insurance or retirement accounts, these accounts will pass directly to your children at age 18 (in most states), giving full financial freedom to your children at age 18 regarding these accounts. Even if you stated in your will that your children should not have access to their funds or accounts until, say, age 30 – if you name your children as beneficiaries on your accounts, these accounts go directly to the kids, with no protection or guidance provided. And since minor children cannot inherit outright, these beneficiary accounts are generally locked away until the child attains age 18, and cannot be accessed without court intervention, monitoring, and strict investment guidelines.
In addition, a will has no power until you die. If you wish to give someone you trust the power to make decisions for you if you become incapacitated due to illness or injury, you cannot do this through your will. Even if you named someone in your will to manage your estate or watch over your children, that person will have no authority to do so while you are alive; you will need court intervention.
A Will Requires Probate Court
Another estate planning myths I often hear is the belief that if you have a will, your loved ones will not need to go to court at all to obtain, sell, or otherwise dispose of your property after you die. After all, you prepared a will that explains all your wishes and directions! Why the need to go to then go to court? But a will is simply the “directions page” for how your probate property will pass – and this property still must pass through a “middleman,” known more commonly as the Probate Court. A will is required by law to go through the probate system before any of the assets it directs can be distributed.
Once your will is admitted to the court after your death, your personal representative or executor will be given official authority to move your assets under the court’s supervision. This ensures your property is distributed according to your wishes and that the court can intervene if there are any disputes over who gets what.
Do not get me wrong – court oversight can be helpful, especially when there is confusion or fighting about a probate estate. Probate court is public and orderly. But the probate process can be long and expensive; for small estates the process may take a few months, but for formal probate estates, the process can take 12 – 18 months or sometimes even more.
Due to the length and complexity of the process, going through probate can easily cost your family a lot of money. Additionally, because probate is a public court proceeding, your will becomes part of the public record upon your death, allowing everyone to see the contents of your estate, who your beneficiaries are, and what they will receive.
Unfortunately, it’s not uncommon for scammers (whether strangers, other family members, or friends) to use this information to try to take advantage of young or vulnerable beneficiaries who just inherited money from you.
Don’t Just Get a Will, Get an Estate Plan
Instead of “just a will,” you may think of a will as a piece of your overall estate plan, not as the entire plan itself.
How can that be? Well, an estate plan is a range of tools and coordinated planning that makes sure everything and everyone you love is taken care of if you die or become incapacitated.
And by using better tools like a living trust (in addition to a will), as your main tool for estate planning, you can direct what happens to your property, and at what ages your children should receive your assets. You may avoid the probate court entirely while ensuring the people you trust can step in and manage your assets immediately if you become incapacitated because of an illness or injury.
If you are ready to see how having an estate plan for your family is different than having “just a Will,” schedule a Life & Legacy Planning Session with me. During the session, we’ll review an inventory of everything you have and everyone you love, and together look at what would happen to your possessions and loved ones when something does happen. Then, I will help you develop a plan to make sure your loved ones are taken care of when you cannot be there and that your plan works for you, and for them, exactly as you want it – at your budget and within your desires.
