Estate Planning is More Than Just a Last Will & Testament
March 2016
More often than not when I meet a new client they ask if I drafts Wills or state that they just want a simple Will. This is based on the belief that as long as they have a Will (or any Will) that they have completed their Estate Plan. While a Will has important powers at death, it does not provide any planning in the event of incapacity during life. A Will may not control everything you own at death, so the people and charities listed in the Will may not even get what you want them to. Many people also assume that all Wills are the same. They are not. A Will drafted for young, middle-aged and older individuals can be drastically different because family goals & circumstances change throughout our lifetimes.
With respect to incapacity, a simple internet search provides the following statistics: we all have a 20% chance of becoming disabled or incapacitated before reaching age 65, and the incapacity risk increases to about 50% after age 65, and nearly 75% for those fortunate enough to live over 80 years old. When it comes to incapacity, a Will does nothing. Only Powers of Attorney allow individuals to name others to make financial and healthcare decisions in the event of incapacity. In Wisconsin, if you do not execute a Power of Attorney, your family will be forced to go through a guardianship proceeding which takes time and money since most individuals will need legal advice or representation to complete the process.
As far as what the Will controls at death, it depends. Real estate (individually owned or at the last spouse’s death) is typically transferred via the Will along with all the “stuff” we accumulate over our lifetimes. However, assets that have a beneficiary listed or set up as payable on death or transfer on death are not controlled by the Will. This can include retirement accounts, life insurance, bank accounts and real estate (if a transfer on death deed is executed). Most of the time this a good thing because if assets are passed through a Will, then your family will likely need to go through a time consuming and potentially costly probate proceeding. A client recently told me that a lawyer told him that probate is not a big deal. For who, the lawyer? Of course not, because the lawyer is getting paid hourly to administer the estate. Probate proceedings can make sense if there is an actual benefit, such as setting up testamentary trusts for young children or to protect assets for elderly spouses/individuals.
For these reasons, not all Wills are the same. For some, the Will simply transfers all the “stuff” because everything else, including real estate, has been set up to automatically transfer to individuals or charities to avoid probate. For others, a Will is drafted to control all of the assets and create testamentary trusts for specific purposes. In some cases, Trust planning is required to meet the needs and goals of the individual or family. In any event, estate planning is more than just a Will or “any” Will.
