Estate Planning Lessons

Planned Giving

Lesson Two: Trusts for Family Security

Fourteen Reasons Why Your Will May Be Obsolete
Do you already have a will?  Great!  But is your will a vigorous, up-to-date, contemporary document that is ready for duty whenever the time comes?

Some people have wills that were drafted back during the Eisenhower administration, and without regular review and updating, such wills can sow confusion and expense for heirs. 

Here are 14 important events that may require a modification of your will:

1.  Marriage
2.  Birth of a child or grandchild
3.  A child reaching adulthood
4.  Divorce
5.  Death of a spouse
6.  Increase in the value of your assets
7.  Acquisition of new assets by gift or inheritance
8.  Giving away or selling assets mentioned in your will
9.  Death of a beneficiary named in your will
10. Changes in the needs of your beneficiaries
11. An executor or trustee dies, moves or becomes disabled
12. Relocation to a different state
13. Purchase or sale of real estate
14. A decision to make additional bequests, such as a gift for the future support of worthwhile causes and institutions

Take time at least once a year to review your will to assure that it is up-to-date with your current needs and circumstances.  New Year’s Day or your birthday can be logical “review dates.”

Have your lawyer look at your will every two or three years, as well.  Changes may have occurred in state or federal laws that could affect the taxation or distribution of your estate.  Revisions of the gift tax and estate tax laws have presented both tax relief and tax challenges for Americans.  Ask your advisers if your plans have been affected.

To make a small change, you may need only a “codicil.”  This is simply an amendment that will preserve most of the provisions of your existing will. To make major changes, a completely new will (which specifically revokes all prior wills) may be preferable.  Either way, you will need your attorney’s help.

Don’t Let the State Write Your Will
Each state has “intestacy” laws – rules governing how property is distributed where there is no valid will.  (Note that some assets will pass automatically to joint owners or to beneficiaries named on a life insurance policy or retirement account.)  Rarely will these intestacy laws mirror an individual’s own wishes.  For example:

A surviving spouse may be entitled to only one-third or one half of the estate, with the rest divided among the children.  With a will, a husband or wife can leave everything to the spouse, knowing that the children will be supported.

Property is generally divided equally among all children.  A parent who wishes to leave more to a younger child to pay for college, or to a child with special needs, can do so in a will.

Some states require the executor or personal representative to post a bond.  With a will, that requirement may be waived.

In most states, if there is no surviving spouse, or children or grandchildren, the estate passes to parents, siblings and nieces and nephews – some of whom may be utter strangers.  There are no provisions for the estate to pass to a close friend or to worthwhile organizations without a will.

State laws on intestacy are undoubtedly well-intended. But doesn’t it make sense to make your own plans through a carefully crafted, up-to-date will?

Choosing Your Executor
Considerable thought should be devoted to carefully choosing an executor (personal representative) who will be your legal representative at death.  Your executor will be legally responsible for settling your estate and carrying out all the provisions of your will.  It is not an easy task, even though an estate attorney provides legal assistance.  Your executor will have to collect and preserve assets, wind up accounting procedures, file tax returns and worry about investments and cash needs.

Ideally, your executor would be not only fully competent to perform such tasks, but also sincerely disposed and motivated to meet the important and unique needs of your particular beneficiaries, including helping them with any special problems that may arise after your death.

You may nominate your husband or wife as your executor, or a competent and experienced friend or relative, or the trust department of a bank.  Or you may wish to follow the example of many who name a spouse, friend or relative together with the trust department of a bank to serve as co-executors.

Write a Letter to Your Executor
Next time you review your will, examine how detailed the provisions are.  Your will probably uses broad categories to dispose of your estate, such as “the residue of my estate to my children.”

How can you make sure items of personal property pass to “the right person”?  You can prepare a letter of instruction to the attention of your executor.  This is not a legal document, so you can write the letter yourself and revise it whenever you feel it is necessary.  A letter of instruction allows you to direct certain items to a specific beneficiary, such as “my diamond earrings to my sister Eileen.”  This gives you the satisfaction of knowing that your property will go to someone for whom it has meaning.  It also prevents disputes over the division of items in your estate.

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