There are many reasons to create a Will. Keep in mind when reading this article that a Will by itself is NOT a complete estate plan, it is merely an important piece of the plan.
In order to have a complete estate plan, you must have a Will, Financial Power of Attorney, Health Care Power of Attorney/Living Will, properly title your assets, and properly name beneficiaries on your accounts. Additionally, in many circumstances, it may be preferable to create revocable and irrevocable trusts. That being said, here are the top 21 reasons to create a Will:
Basic Reasons to Create a Will-Control
Let’s start with the basic reasons for creating a Will. In a number of ways, you can control certain aspects of what happens after you pass.
(1) You get to decide where your assets go and who will inherit from you (rather than relying on state law to dictate where it should go);
(2) You get to decide HOW your assets will be distributed to loved ones. For example, you can leave money to people outright or in trust.
(3) If you create a trust for someone, you can set the terms of that trust. Click on the following link to view common types of trusts for children;
(4) You get to choose who serves as executor (the person who will be in charge of your financial affairs after you pass);
(5) If you decide to leave money in trust for a loved one, you get to choose who manages those trust funds;
(6) You get to choose should be guardian for your minor children; and
(7) You get to choose who should be a funeral representative and whether you have any specific burial or cremation wishes.
One important aspect to remember is that EVERYTHING SUPERCEDES A WILL. So while a Will can clarify your wishes, beneficiary designations on retirement accounts, life insurance policies, etc. supersede the designations in your Will.
If you have an old life insurance policy naming your mom as the beneficiary, that’s where the proceeds would go, not to a spouse or child named in your Will. If you want your minor children to receive their inheritance in trust, but you have named the children as beneficiaries of your IRA, the beneficiary designation controls and it does not go into trust for them. Your Will, trusts, and beneficiary designations must be coordinated.
Clear Guidance Provided in a Will is Important
Separate and apart from having the ability to specify what you want, one of the many reasons to create a Will is to provide clear guidance for your loved ones.
(8) Clear written proof of what you want is important because your wishes may not be obvious. Therefore the Will can provide guidance when different people think you would have wanted different things; and
(9) Guidance may often be necessary on who should be paying any estate or inheritance taxes. (Often, if you are making a specific bequest, the tax can be paid by the recipient of the bequest or the residuary beneficiaries.);
(10) A clear plan can help avoid infighting amongst surviving family members. (This is not always true though – some families will fight unfortunately no matter what. However, a clear, well written Will is more likely to be upheld by a Court).
Having a Will Makes the Estate Administration Process Easier
One of the important things to be aware of is that when someone passes away and there are assets in that person’s name, those assets need to be dealt with. Every state has two processes for dealing with such situations.
There is one process when you have a Will, and then there is another process for when you don’t have a Will. The process when you have a Will approved by the local surrogate is known as probate. When you don’t have a Will, the process is known as an Intestate Administration.
(11) In short, the Estate Administration process when you have a Will is almost always easier than the Intestate Administration process. While the probate process varies by state, it is usually more simple than an Intestate Administration because there are fewer forms to complete, it is often less expensive, and it may not require notice and consent of the beneficiaries.
(12) A Will can clarify that the Executors, Trustees, and Guardians do not need to be insured. In this type of situation, the type of insurance your fiduciary may need is known as a “bond”. The purpose of the bond is to make the beneficiaries whole in the event the executor or trustee absconds with the funds. The bonding process can be particularly complex if the proposed executor, administrator, or trustee does not have excellent credit.
Cost Savings and Tax Savings
There are many ways that a Will can save costs. Another one of the important reasons to create a Will is so that you can minimize taxes and costs after you pass:
(13) You can eliminate the need for a bond for the Executor, Trustees, and Guardians. (This could result in savings of approximately $500 for every $100,000 that the estate is valued at depending upon your State.)
(14) Clarity with respect to your plan is likely to reduce lawsuits, which of course can save legal fees;
(15) In many jurisdictions, the probate process is much less expensive than the Intestate Administration process. (So it’s not just easier, but usually less expensive.);
(16) You can have clauses that allocate tax inefficient assets to tax exempt beneficiaries (e.g. allocate retirement assets to charities); and
(17) You can create trusts for a spouse to maximize your tax exemptions (although we typically recommend doing this in revocable and irrevocable trusts).
Advanced Reasons to Create a Will – Flexibility
Older Wills typically do not offer as much flexibility as modern Wills and Trusts. Accordingly, even if you have a Will in place, there are many reasons to create a new Will or Trust. For example:
(18) A Modern Will should allow for a great deal of flexibility because of the ever-changing tax laws. Regardless of whether the value of your estate goes up or down, the Will should contain formulas to take into account the current state of the tax laws and future anticipated changes;
(19) Trustee provisions – Many problems occur when beneficiaries are stuck with trustees whom they cannot remove. A modern Will should have the ability for responsible beneficiaries to replace trustees and appoint independent trustees to allow for invasion of principal to beneficiaries in a way that will not produce adverse tax consequences;
(20) Post mortem planning – A Will should allow for the surviving spouse or an independent executor to do planning after the death of the testator including executing disclaimers, powers of appointment, dividing trusts, combining trusts, and making tax elections; and
(21) You can have a trigger that one person serves as an executor, but if your child is of a certain age at the time of your death, that they leap-frog in front of them.
Creating a Will
It is well recognized in America that it is important to have a Will. The Estate Planning attorneys at The Pollock Firm LLC have over two decades of experience helping clients create custom Wills and Trusts. Please call if you would like to schedule an appointment to discuss your specific needs or the top reasons to create a Will.