When considering an estate planning strategy, planners often fall into assumption that a will is always required. The logic behind this assumption may apply in some cases; however, a number of situations may arise in which a will is not required or may be counterproductive to the overall estate planning strategy. Before asking when is a will needed, it is important to understand a will’s legal function.
What does a will accomplish?
On a basic level, a will is a written document that outlines how assets will be distributed upon death. An executor, named in the will, oversees this process while the estate is being handled by a probate court. Assuming everything goes according to plan, all estate assets will be distributed according to testamentary intent. However, estate planners often fail to recognize that in complex estates, things often do not go according to plan, in these cases a will can often create additional costs to the estate and insert unwanted confusion and ambiguity. Therefore, the law recognizes that a will is not a legal necessity to pass on assets; rather it is one of many options available to estate planners.
A will is not required for estate assets to pass to heirs or beneficiaries after the testator’s death. In cases in which the testator dies intestate (without a will); the law provides rules of inheritance that provide guidelines for inheritance in the absence of a will. Inheritance law provides some rules to address situations involving intestate succession. The first consideration will involve whether the decedent was married. If the decedent died while married, property would pass to the decedent’s spouse. However, if the decedent was not married, the estate is distributed to the decedent’s children, who receive estate assets in equal shares. If there are no children or spouse, the estate goes to the decedent’s parents. If there are no parents living, the property is distributed to the decedent’s brothers or sisters. If there are no brothers and sisters, or if they are deceased their children (decedents nieces and nephews) in equal shares. If the decedent’s sibling or their child (ren) are, the decedent’s grandparents will inherit the estate. If there are no living grandparents, then the decedent’s aunts and uncles, or if there are not any aunts and uncles, the decedent’s cousins will inherit.
Situations in which a person dies intestate, the probate court will attempt to ensure that the estate is disbursed in light of rules of inheritance. Of course, disputes may arise, or the validity of the distribution of estate assets may be challenged in these cases inheritance law would guide the court’s decision-making on how to resolve these disputes.
When is a will needed?
A will is not required to pass assets to heirs to beneficiaries; under some circumstances, it may simplify the process of handling one’s final affairs; however, it is not required. In fact, many jurisdictions allow a decedent’s estate to be disposed of without a will. Relying on what is known as the small estate designation an estate representative may transfer the title to property and administer the decedent’s accounts by presenting what is commonly referred to as a small estate affidavit. Normally, an estate must fall under a monetary threshold to qualify for the small estate designation; as such not all estates will be able to benefit from this designation. In situations in which the small estate designation is not appropriate estate, planners may still be able to avoid using a will with other estate planning tools.
A commonly held preference among estate planners involves either avoiding using a will as a tool to distribute assets; rather only relying on a will to express final instructions not related to the distribution of estate assets. Instead of a will, estate planners often rely on the wealth of estate planning tools that can be used to with greater flexibility and most importantly can reduce a number of assets that are exposed to the probate process or exposed to estate tax liability. Estate planners can rely on a variety of trust instruments or payable on death accounts to avoid using a will as an estate distribution tool. However, whether a will is needed depends on the assets in an individual’s estate and how these assets will be distributed.
When determining whether a will is needed, the most important consideration rests on the question: Does a will accomplish the intended estate planning goals. If the answer to this is yes, then one should consider could estate distribution be accomplished without a will. If the answer to this is yes, then one must consider whether potential costs and delay related to the probate process be avoided by not using a will. If yes, then one should consider the comparative costs and benefits of not using a will and using a will. The main takeaway here is that individual circumstances and intent will largely dictate whether a will is needed or not.
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Anna is a journalist and estate planning author.