A person’s last will and testament is the most common part of an estate plan. Some people view it as the sum total of estate planning. While vital to your estate, wills are used to name beneficiaries for money and specific assets and designate a guardian for minor children.
Comprehensive estate plans include a will and other crucial documents naming someone you trust to manage your finances and health care decisions if you become incapacitated. These include powers of attorney, living will, health care directive and revocable living trust.
Items not to include
Leaving certain items out of a will can be beneficial for your heirs, allowing them to receive their inheritance faster while reducing tax liabilities in many cases. These assets can bypass probate, which can be a long and complicated process. Here are a few items to exclude:
Trust assets: Trusts are separate entities used to distribute property, and they operate independently of a will, avoiding probate. Assets used to fund trusts should never be duplicated in your will.
Assets with named beneficiaries: Certain financial assets are already set to be distributed to beneficiaries when someone dies – known as transferable-on-death or TOD. These include:
- Bank accounts
- Investment or brokerage accounts
- Pension plans and retirement accounts
- Life insurance policies
Putting these items in a will is not advisable, but it is imperative that your beneficiary designations are up to date. You can also include these items in a letter of instruction outlining your wishes.
Jointly-owned assets: Property you own with a spouse, sibling or others can pass directly to a co-owner or co-owners by setting up a “joint tenancy with rights of survivorship” arrangement.
Business interests: These assets are sometimes included in a will, but that often leads to probate issues, such as a contested succession plan. You may want to discuss alternatives that better fit your situation with an experienced estate planning attorney.
The best estate plan meets your unique situation
Everyone’s circumstances are different regarding wealth, family dynamics and wishes for bestowing assets to the next generation. Estate plans should be individually crafted for each family, especially for situations involving blended families, children with special needs or preserving government benefits, such as Medicaid. Your lawyer can guide you through this complicated process to smoothly and efficiently distribute your property while preserving your legacy.
