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Is a Will Enough

April 20, 2019

Only a small percentage of people have wills. The most commonly cited statistic states that one-third of the adult population have prepared wills. But is a will enough? No, there are other essential documents that I believe all people need in addition to a last will and testament.

A will only controls the property that a person owns in his or her own name at the time of death. Any assets that are owned with a right of survivorship or with a beneficiary designation are going to pass "outside of the will." That can result in unintended results. I once had a case where a man told his insurance agent that he had changed the beneficiary designation on his employer-provided life insurance from his mother to his wife of five years. A year or so later I was representing his widow because she had learned that he had not made the change of beneficiary. It went to court and, because she had a weak legal position, she had to settle for a fraction of the death benefit.

The complexity of beneficiary designation issues is a recurrent problem. I frequently encounter young parents who have named minor children as their secondary beneficiaries on their life insurance and their IRA accounts. Such moves are counter-productive when the estate plan calls for a trust to protect all this wealth in the event that there is no surviving parent. In this era of multiple marriages, if the surviving parent is an ex-spouse the problem of protecting the children can be even more dramatic. (A natural parent succeeds to custody of a child upon the death of a custodial parent/ex-spouse).

IRA's often contain a considerable portion of the family wealth. Because they are "beneficiary designation" property and hold tax-deferred money, IRA's should not usually pass through the account holder's will in the event of death. If an estate is the IRA beneficiary, the tax deferral is usually lost because of the five-year rule requiring the account to be liquidated within five years after the year of the account holder's death. If a trust is a beneficiary of an IRA, certain tax regulations must be observed in order to obtain the best income tax treatment for the death benefit. Again, focusing exclusively on the will can result in an incomplete estate plan with unintended (and undesirable) consequences.

Not all estate planning issues are connected with death. In the event of a disabling illness or injury a person may not be able to act on his or her own behalf. If the legal capacity is serious or permanent, then probate court proceedings to obtain the appointment of a guardian is the traditional solution.

A conservatorship petition is notorious for being time consuming, expensive and overly protective of the property of the disabled person. Having an alternative requires planning in advance. A person with substantial financial or real estate investments might use a "living trust." At a minimum a standby general power of attorney is a necessary precaution for every adult. A catastrophic illness or injury can result in an even more dramatic need for a Advance Directive for Health Care, which appoints an agent to manage the disabled patient's health care, (i.e. tell the doctors what you want done.)

It seems as if everyone has heard of a "living will" which memorializes a person's preferences on life support procedures in the event of a coma, persistent vegetative state or a terminal condition. In 2007 Georgia passed a statute to consolidate the old living will statute with the durable power of attorney for health care. The new document is called the Advance Directive for Health Care. Every adult should have one, regardless of age or the state of health.

So it should be obvious by now that "all I need is a simple will" may be the wrong approach for a lot of people. Even if someone has the other documents mentioned above, the need to coordinate those documents and the person's economic affairs won't go away. I recommend to my clients that they review their estate plans every three to five years, or after any major life event (e.g., a death in the family, the birth of a child, retirement, major illness, etc.). That involves more than just reading through the documents. Checking beneficiary designations, running a worksheet tabulation of all assets (including life insurance), and thinking about the continued suitability of candidates for executor, trustee and guardian all go into a successful effort to avoid obsolescence.

"Estate planning" does not require fancy folders and color charts with twenty-year projections of future wealth. It involves creating a set of documents that implement those decisions necessitated by that individual's circumstances. A simple life will probably result in simple documents, but only after a thorough analysis of all the facts.