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Estate Planning Facts: Limitations of a Last Will & Testament

Estate Planning Facts: Limitations of a Last Will & Testament
February 20, 2015 weberlaw

Although a last will and testament can be an effective and inexpensive estate planning tool for legacy succession, there are limitations on what a will can accomplish.  When creating an estate plan, it is as important to understand what a will cannot do as what it can accomplish.  Experienced Kansas estate planning lawyer J. Joseph Weber has provided some examples of legacy succession issues that cannot be effectively handled with a simple will.

Assets Not Passed Via a Will

While you can use a will to pass the bulk of your assets to loved ones when you die, there are certain assets that usually pass to successors by other means, such as:

  • Jointly Titled Property: If you have bank accounts, real estate or vehicles owned in “joint tenancy with right of survivorship,” your interest in these assets simply transfer to the joint owner when you pass away.  If you have real estate held with a co-owner in “tenancy by the entirety” or “community property with right of survivorship,” this property also will pass to the co-owner.  A will cannot trump the form of title for this type of property, so you should consult an estate planning attorney if the form of title on the property does not reflect your intentions regarding its disposition.
  • Property with a Beneficiary Designation: When you purchase certain types of insurance, such as a whole life policy, an IRA account or 401K, you will be asked to make a beneficiary designation.  The beneficiary will be the person who receives the property or benefits when you die.  Because a will cannot override the beneficiary designation, you should periodically review your accounts and insurance policies to confirm that your choice of beneficiary is still accurate.  If you are married, marital property law may require that your spouse be a listed beneficiary, so you should speak to an attorney about the impact of marital property law on beneficiary designations.  If you also have transferred property into a living trust, this property also will be handled according to the terms of your trust rather than your will.
  • Payable on Death Accounts: Some bank accounts have “Payable on Death” provisions which essentially means they are handled liked a beneficiary designation.  The funds or property will be paid to the designated party when the principle dies.

No Special Needs Planning

When you leave property or money to an individual with special needs, care must be taken to avoid interfering with the recipient’s eligibility for needs based government assistance programs.  Wills do not provide the proper mechanism for these types of special arrangements, so you should seek legal advice about setting up some form of special needs trust if you will be making a testamentary gift to someone with special needs.  The trust will also permit you to ensure the money is managed properly if you have family members who might deplete the funds prematurely because of a lack of maturity or inadequate money management skills.

Imposition of Conditions on Gifts

A will may not impose significant restrictions on a testamentary gift, such as a requirement that a person marry or divorce.  While some lesser conditions might be permissible depending on the jurisdiction, such as a requirement that the recipient of a gift attend college, wills provide a poor vehicle for enforcing such conditions.  Generally, a trust provides a better way to impose these types of requirements because a trustee will be named who has a duty to ensure that the conditions set forth are satisfied.

Probate & Estate Tax Expenses

Since wills must go through the probate process, there will be expenses incurred in terms of administering your estate that might be avoided if you use a trust.  Depending on your situation, you also might be able to use a trust to avoid estate taxes that would otherwise be owed if you relied on a will as the cornerstone of your estate plan.

Instructions Regarding Memorial and/or Burial Arrangements

A will might not be discovered for some period of time after a person passes away.  Because final burial or memorial arrangements must be made promptly, a separate document should be used to specify any specific wishes.  This document should be made readily available to the person who you want to coordinate the arrangements.

If you have questions about wills or the probate process, we welcome the opportunity to talk to you and answer your questions.  We invite you to call the Weber Law Office at (316) 265-7802 or to submit an inquiry form through this website to schedule your initial consultation.