When the average person thinks about “estate planning,” a Last Will and Testament is often the first thing – and sometimes the only thing – that comes to mind.
A Will is definitely an essential document, and every adult needs one. That said, your Will cannot provide several critical protections for you and your family. That is why it should be just a starting point for thorough, thoughtful planning. Below we list some important goals a Will cannot accomplish, and tell you what additional steps you must take to fill in the gaps.
1. Your Will Does Not Keep Your Estate Out of Probate
It is a common misconception that having a Will avoids probate. It does not.
Probate is the court-supervised process through which creditors of your estate can make claims on your estate and your assets are passed to the beneficiaries named in your Will. Probate can be a hassle for families and incur unnecessary expense, draining funds you would prefer go to your beneficiaries. It can also be time consuming; several factors, including the number of beneficiaries and the extent and valuation of assets, can bog down the process and delay getting money into the hands of your beneficiaries. Moreoever, because the probate process is public record, it exposes your family information to public view. No surprise that many people want to keep their estates out of probate.
Fortunately, there are probate avoidance techniques available. One of them is a Revocable Living Trust, a popular estate planning tool for Floridians. Our attorneys can advise you about this and other probate avoidance strategies suitable for your particular circumstances.
2. Your Will Does Not Control How Certain Assets Are Distributed
If you have named a death beneficiary or have a co-owner for an asset, your Will does not control how that asset is distributed after you are gone. That asset will pass directly to the beneficiary or co-owner by “operation of law.” What your Will says is immaterial. Many people do not understand this critical fact. They end up with a poorly structured estate plan that may ultimately cause family infighting. Here is a typical example:
Let’s say Mary Jones has two sons. She has a Will that directs all her assets to be divided equally between them. Over the years she has always assured her sons that they will be treated equally upon her passing. However, Mary has named one son the beneficiary of her large bank account, perhaps just as a matter of convenience because he lives close by and helps with her banking. When she dies, the bank account will pass to the son she named as beneficiary of the account, notwithstanding what she wrote in her Will. You can imagine the situation that could now develop between the two sons: The non-beneficiary son may claim that this was not really their mother’s intention, that she failed to understand that her Will would not govern the distribution of all assets, and therefore he is entitled to half that bank account. The son who inherited the account asserts that because he provided more help for their elderly mother, he deserves the funds, and that was in fact what their mother wanted to happen. Of course, mother is no longer around to clarify her intentions. The possible result: a frayed relationship between the two sons that may never heal, and even a lawsuit.
When our lawyers meet with you, we carefully review with you the titling of all your assets, making sure your beneficiary designations and your estate planning documents are in sync and serve your goals. (We will also advise you about certain assets that should be beneficiary designated and should pass outside your Will – for example, your 401(k).)
3. Your Will Cannot Provide For Your Pet
For many of us, pets are family. However, Florida law does not see it that way. In the eyes of the law, your precious pets are property, and may not be named as beneficiaries under your Will. You can of course make informal arrangements to ensure pets that outlive you get good care. But if you want greater peace of mind that comes from making more formal legal arrangements, you have an option: a Pet Trust, which is allowed under Florida law. Read about pet trusts.
4. Your Will Provides No Protection While You Are Living
Your Will is a death instrument only. If you become incapacitated and need someone to manage your health care decisions and your financial affairs, either temporarily or over the long haul, your Will has no value whatsoever. The Personal Representative (executor) named in your Will has no authority to provide the assistance you require. This leaves you exposed to the unpleasant prospect of a court-ordered guardianship.
For protection during your lifetime, you should create a Health Care Surrogate and a Durable Power of Attorney. The Health Care Surrogate empowers someone you know and trust to make your health care decisions if you are unable to do so. The Durable Power of Attorney authorizes someone to manage your financial affairs. These documents reduce the risk of your being subjected to court guardianship. And by giving your family members a written blueprint stating who you want to take control and how things handled if you are inacacitated, you lessen family stress and short-circuit any disagreements over what you “really” wanted.
A Revocable Living Trust can also provide management of your financial affairs if you become incapacitated.
5. You Cannot Use Your Will To Dodge Creditors
Clients occasionally tell us they want to “cut out” their creditors by inserting a provision in their Will. Any such provision is not valid. In fact, one of the main reasons for the probate process is to protect creditors and ensure that they are paid from your estate. Creditors must be paid before anything is distributed to beneficiaries.
6. You Cannot Choose Just Anyone To Handle Your Estate
When you create your Will, you name a Personal Representative (executor) who will work under court rules to administer your estate. Your Personal Representative is accountable to the court. He/she is responsible for finding your assets, identifying and paying creditors, handling tax returns, and ultimately, making distributions to beneficiaries.
Florida has rules about who can serve in this capacity. One rule is that the Personal Representative must must be a Florida resident, or if not, a close relative by blood or by an existing marriage. So even if you have a longtime and very responsible friend who you want to serve in this capacity, he/she may not do so if not a Floridian or close relative. A Revocable Living Trust presents no such restrictions. This is another reason that a Revocable Living Trust may be a better choice than a Will as the centerpiece of your estate plan.
7. Your Will Does Not Protect Loved Ones With Special Needs
A simple Will that makes outright disributions to beneficiaries cannot protect your child with special needs or an incapacitated spouse. In fact, a Will that provides a lump sum to these individuals could do more harm than good by putting the beneficiary over the $2,000 asset cap and rendering him/her ineligible for government benefits such as SSI or Medicaid. If this is your situation, you should create a Special Needs Trust for your loved one. You can put a provision in your Will that creates a Testamentary Trust to provide for the disabled person, or you can create a separate, freestanding Will. Our attorneys can advise on how to proceed and make sure everything is set up correctly.
But… You DO Need A Will As A Safety Net
People buy and sell assets as the years go by, meaning it is impossible to know with certainty just what assets a person will have, or how they will be titled, at death. Therefore, even if you have a Revocable Living Trust and/or your assets are currently beneficiary-designated, you still need a Will that anticipates that there may be assets not in the Trust, or assets whose beneficiaries cannot be located or have passed away. You need a Will to serve as a contingency measure – in other words, a safety net. Your Will can also address any funds that may come to you after you pass on, for example, a refund from your credit card company for a pre-paid trip you never got to take, or unclaimed funds. (Unclaimed funds can be searched for at www.fltreasurehunt.gov and www.missingmoney.com).
A last will and testament is essential for every adult, but taking care of yourself and your family – in life and in death – generally requires more than a simple Will. Be sure to consult an experienced estate planning/elder lawyer to discuss your needs and concerns. The Karp Law Firm attorneys can be reached at 561-625-1100.
