Is Your Will Enough?

More than half of American adults do not have a will in place.  Unfortunately, even among those who do have a will, in many cases that document either does not do what they think it will, or no longer meets their needs as their circumstances change over the years.  Here are some examples of people who had an estate plan but did not have an adequate plan.

Wills in a Blended Family

Sam and Pat are in their seventies.  Their marriage is a second marriage for both, and they each have adult children from prior marriages.  What they want is to make sure the surviving spouse is taken care of in their lifetime, and that anything remaining goes to the children of the first spouse.  So Sam's will says everything goes to Pat, and if Pat is no longer living, to Sam's children.  Pat's will says the same in reverse.

Have they accomplished their goal?

No.  A will only controls who receives what at the moment that the estate is probated.  If Pat survives Sam, Pat will get all of Sam's assets and Sam's children will not get anything.  Pat could decide to share the assets with Sam's children, but has no legal requirement to do so.  What they need to accomplish their goal are trusts for each of them.  In a trust, you can specify what happens in the future.  For example, the trust could allow Pat to use the assets, but also specify that upon Pat's death the trustee is to distribute the remainder to Sam's children. 

What else haven't they accomplished?  Pat and Sam collectively have over $2 million in assets, including their home and retirement funds.  The simple will they had drafted does not protect either of them from Massachusetts estate tax.  Remember also they are in their seventies.  If either of them needs long term care, they could find themselves rapidly depleting this legacy that they have built.  If they want to protect any assets in the event they need assistance with long term care costs, they need to put an irrevocable trust in place at least five years before they need that care.

The Importance of Updating an Estate Plan

Mary and Jim are in their sixties, married with three children.  They put an estate plan together fifteen years ago.  They each have a will and a trust, with the majority of their assets going into the trust to be used for the surviving spouse during his or her lifetime, then pass the assets to the three children equally.  Their goal was to make sure the surviving spouse is taken care of in their lifetime, and that anything remaining goes to their children, and also to maximize the value that could be preserved for their children.

Have they accomplished their goal?

Only partly.  The trusts do allow them to ensure their children ultimately receive the assets, which is what they wanted.  However, in the last fifteen years their home has appreciated significantly in value, as has the value of each of their retirement funds.  Now each of them is above the Massachusetts estate tax threshold of $1 million, once the home, retirement funds, and life insurance are counted.  The trusts that were previously drafted were not structured to protect them from tax liability, though they easily could be.

Protecting Family Property

Chris and Jamie own a vacation property that is an important family asset.  They have four grown children.  Their goal is to make sure that when the children inherit the family property, nobody can force the other siblings to sell the property.  They drew up a will that leaves the property equally to the four children, with the specification that it cannot be sold without the unanimous agreement of all four.

Have they accomplished their goal?

No.  The will should be effective to leave the property equally to the four children, but a will cannot control what the children do with the property in the future, after the estate is probated.  To do this, Chris and Jamie would need a trust that specified when and how decisions about selling the property should be made.

Excluding Legal Heirs

Sally is a widow with four grown children.  She is close to three of them, but the fourth has been estranged from her and the family for years.  The fourth child has two young children of his own.  Sally's goal is to divide her estate between the three adult children she is close to and her two grandchildren by the fourth child.  She does not want to leave anything directly to the fourth child.  She had a will drawn up that said exactly that, and did not mention the fourth child at all.

Has she accomplished her goal?

Probably not.  Sally is allowed to disinherit her fourth child, but unless the will specifically mentions the fourth child and states that it is her intention not to provide for him in her will, the will itself could be subject to challenge by that child.  Also, unless she has created a trust (in her will or otherwise) for the two grandchildren, if they are still minors when she passes, an adult- most likely their parent, the fourth child she intended to omit- would need to step in as a trustee to manage those assets until the grandchildren reach adulthood, which is not what Sally wanted. 

Online Will

Jack is a single man in his sixties with three grown children.  His most substantial asset is his home, which is valued at approximately $800,000.  Two of his children are financially secure, but the third has special needs and is financially dependent on Jack.  Jack's goal is to leave the property equally to his three children so that it can be sold upon his death, with the third child's share available to continue to support her.  He purchased an online will service and created a simple will that directed that all of his assets be divided equally between his three children.  Per the correct instructions from the online will provider, he had it properly witnessed and notarized.

Has he accomplished his goal?

Only partly, and not the most important parts.  His three children will eventually inherit all of his assets equally, including the home.  The home, however, cannot be sold until he probate process is complete, which could take a year.  Because that is his main assets, there is not much left to take care of the third child during the probate process.

Also, because the online program did not ask him any questions about whether his children had special needs, he was not advised about the best way to create a special needs trust to make sure his third child is not suddenly ineligible for state or federal benefits she would otherwise be entitled to, because of her inheritance.

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Durable Power of Attorney

Jane wants to make sure that her adult child can have access to and can manage her assets if she is incapable, and to access her bank accounts after she passes to pay bills and to pay for final arrangements.  She had a durable power of attorney drafted with her child designated as the power of attorney.

Has she accomplished her goal?

No.  The power of attorney will allow the child to help Jane with her assets during Jane's lifetime, but loses its effect up.  Once Jane has passed, the child will have to go to court to get appointed as personal representative before he can legally do anything with Jane's assets.  The best way to make sure assets pass immediately is to put them in trust.  Another solution for interim expenses is to put funds in a joint bank account with the child that are sufficient to cover final expenses and any bills that may come due before the child can be appointed personal representative (usually a few months).

How Can We Help?

All of these stories are adapted from real clients who had very real shortcomings in their existing estate plans.  The good news is that these are easy problems to fix.  We are ready to help.  We have a simple process for getting you from wherever you are now to executed and final documents.  It starts with an initial consultation, which is absolutely free.  You can use the button below to schedule your consultation, or simply give us a call at 781-784-2322, or fill out our web form.