Clients often assume that their family legacy can be managed and cared for with the push of a few buttons on the computer keyboard, after which a Will magically appears to solve all of their concerns. While there are numerous websites out there that will have clients believe such a notion is true, nothing can be further from the truth. A customized approach to passing family wealth between generations is imperative, no matter the size of the estate.
In fact, a Will alone requires substantial discussion to resolve such fundamental issues as who gets what, when and how, following the death of its author. For instance, a prototypical “simple” Will leaves everything outright to a surviving spouse and then to the children, and designates the surviving spouse and then the eldest child as the executor. Left unaddressed are extremely important issues, only some of which are as follows:
- The difference between probate and non-probate assets and which assets are even governed by the terms of the Will;
- The taxation of those assets and who will pay the tax;
- The qualifications of any family member to serve as a fiduciary;
- The impact of one sibling serving as a fiduciary controlling the assets of his or her siblings;
- The impact of an outright gift to a surviving spouse on the family legacy;
- The payment of debts and expenses; and
- The legacy of a predeceased child;
Importantly, a Will itself cannot deal with various other issues that are essential to the estate planning process for the client and his or her family. A few of these issues are as follows:
- Beneficiary Designations. Assets that pass by beneficiary designation, such as retirement accounts, life insurance policies and annuities, may need to be changed to reflect the client’s testamentary intent as set forth in the Will. A Will does not govern these assets.
- Asset Titling. Similarly, jointly owned assets will automatically pass to the surviving owner, which could contradict or confuse the client’s plan.
- Tax Planning. Changes at the federal level have effectively eliminated a federal estate tax liability for all but the super-wealthy. Some state estate tax laws, and especially those of New Jersey, are not nearly as generous and clients in those jurisdictions may wish to adopt tax-efficient Wills to minimize if not eliminate their state estate tax exposures as well.
- Management of Assets during Lifetime. As a Will only applies at death and to the disposition of assets, it cannot assist a client in the management of his or her assets during lifetime. A comprehensive estate plan should also include at least Durable Powers or Attorney and perhaps Revocable or Living Trusts to manage assets if and when a client no longer can or is no longer interested in doing so for themselves. Moreover, a Revocable or Living Trust may provide some privacy in your testamentary disposition since this type of trust is not a public record, unlike a Will.
- Medical Decisions. Finally, a Will cannot provide any assistance in dealing with a client’s medical and health issues. Separate documents, such as a Living Will, Advance Health Directive for Health Care and a HIPAA authorization are necessary for the proper resolution of a client’s medical needs during lifetime.
Proper guidance throughout the estate planning process is imperative to ensure that all issues are fully addressed. We frequently say rhetorically that clients would never dream of performing heart surgery on themselves, or see a pediatrician to treat a neurological issue. Clients should no more draft their own Wills when in need of estate planning services.