“Once you place property in one of the following forms of ownership, listing that property in your will has no effect,” Denis Clifford explains in Plan Your Estate. Clifford is referring to:
- Living trust
- Joint tenancy property
- Pay-on-death bank accounts
- Life insurance policies with named beneficiaries
- Funds inside 401(k), profit-sharing, IRA accounts
- Property promised to someone in a prenuptial or partnership agreement
Simply put, assets in these accounts don’t need a will to “tell them where to go” – the trust, insurance policy or pension plan already has that set in motion.
Even if an estate plan has both a will and a trust, assets not actually in the trust will be distributed by the executor according to the terms of the will, and those terms might be very different from the terms of the trust. Unless there was a “pour-over will” directing the executor to transfer property into the trust after the person’s death, whatever is not in the trust will follow the directions in the will.
“If we are to believe what we see in the movies or read in contemporary novels,” say Theodore Hughes and David Klein in The Executor’s Handbook, the reading of a will and the settling of an estate are rather simple processes”. In real life, the two authors point out, the process is not that simple at all, because a will does much more than leave assets to specified beneficiaries.
Some of the other tasks accomplished through a will are:
- Paying debts. These include credit card balances, personal loans, mortgage payments, final bills, and funeral expenses.
- Designating a guardian for minor or incompetent children
- Naming a conservator to handle the inheritance of minors or incompetents
- Naming an executor to carry out all the terms of the will
But, before any will can do its work, it must get found. That is why it is so crucial to leave directions for survivors. Why is the will so crucial in settling an estate?
- Depending on the person’s state and county of residence mentioned in the will, that’s where the probating of that will takes place. “I, John Doe, being a resident of Columbus, Indiana…” will determine the court that will be involved in probating the estate.
- The will names the beneficiaries, each of whom has an interest in the process.
Besides distributing assets to beneficiaries and paying debts, there are several other vital functions for a will to perform, as Liza Hanks and Carol Elias Zolla explain in The Trustee’s Legal Companion. Two of those are:
- Giving instructions about handling digital assets (online accounts and files)
- Providing for the care of a pet (You can’t leave property directly to a pet, but you can use the will to leave money to someone’s who’s agreed to care for that pet)
If you prepare a thorough estate plan and arrange to avoid probate for all your property, do you still need a will? Yes, says Denis Clifford:
- Some types of property (cars, for example) don’t lend themselves to leaving through a trust
- A person might end up acquiring property shortly before death and not have time to put that property into the trust.
As is true about any tool, we like to point out to our Geyer & Associates clients, it’s important to understand what a will, as an estate planning tool, will and will not accomplish.
– by Ronnie of the Rebecca W. Geyer & Associates blog team
