A will is one of the most basic estate planning tools. Relying solely on a will is a suitable option for many people. However, depending on the specific family situation, more advanced planning may be most appropriate.
A will is used to designate how you want your assets distributed to your surviving loved ones upon your death. If you die without a will, state law governs how your assets are distributed, which may or may not be in line with your wishes.
Not all assets can (or should) be included in your will. For this reason, it is important for you to understand which assets you should put in your will and which assets you should include in other planning documents like trusts.
While you should always consult with an experienced planning professional like us when creating your will, here are a few of the different types of assets that should not be included in your will.
1. Assets with a right of survivorship: A will only covers assets solely owned in your name. Therefore, property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship, bypass your will. These types of assets automatically pass to the surviving co-owner(s) when you die, so leaving your share to someone else in your will would have no effect. If you want someone other than your co-owner to receive your share of the asset upon your death, you will need to change title to the asset as part of your estate planning process.
2. Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity and cannot be passed through your will. This includes assets held by both revocable living trusts and irrevocable trusts.
In contrast, assets included in a will must first pass through the court process known as probate before they can be transferred to the intended beneficiaries. To avoid the time, expense, and potential conflict associated with probate, trusts are typically a more effective way to pass assets to your loved ones compared to wills.
Since it can be difficult to transfer all of your assets into a trust before your death, even if your plan includes a trust, you will still need to create what is known as a “pour-over” will. With a pour-over will in place, all assets not held by the trust upon your death are transferred, or “poured,” into your trust through the probate process.
Meet with us for guidance on the most suitable planning tools and strategies for passing your assets to your loved ones in the event of your death or incapacity.
3. Assets with a designated beneficiary: Several different types of assets allow you to name a beneficiary to inherit the asset upon your death. In these cases, when you die, the asset passes directly to the individual, organization, or institution you designated as beneficiary, without the need for any additional planning.
The following are some of the most common assets with beneficiary designations that should not be included in your will:
- Retirement accounts, IRAs, 401(k)s, and pensions
- Life insurance or annuity proceeds
- Payable-on-death bank accounts
- Property such as bonds, stocks, vehicles, and real estate that have Transfer-on-Death instructions
4. Certain types of digital assets: Given the unique nature of digital assets, you will need to make special plans for your digital assets outside of your will. A will may not be the best option for passing certain digital assets to your heirs. In some cases—including Kindle e-books and iTunes music files—it may not even be legally possible to transfer the asset via a will, because you never actually owned the asset in the first place—you merely owned a license to use it.
Some types of social media, such as Facebook and Instagram, have special functions that allow you to grant certain individuals access and/or control of your account upon your death, so a will would not be of any use. Always check the terms of service for the company’s specific guidelines for managing your account upon your death.
Regardless of the type of digital asset involved, NEVER include the account numbers, logins, or passwords in your will, which becomes public record upon your death and can be easily read by others. Instead keep this information in a separate, secure location, and provide your fiduciary with instructions about how to access it.
For more information on transferring ownership of your digital assets upon your death, read 5 Steps to Adding Digital Assets To Your Estate Plan and What Happens To Your Facebook Account When You Die? From there, meet with us for more detailed guidance and support with properly including digital assets in your plan.
5. Your pet and money for its care: Because animals are considered personal property under the law, you cannot name a pet as a beneficiary in your will. If you do, whatever money you leave it would go to your residuary beneficiary (the individual who gets everything not specifically left to your other named beneficiaries), who would have no obligation to care for your pet.
It is also not a good idea to use your will to leave your pet and money for its care to a future caregiver. That is because the person you name as beneficiary would have no legal obligation to use the funds to care for your pet. In fact, your pet’s new owner could legally keep all of the money and drop off your furry friend at the local shelter.
The best way to ensure your pet gets the love and attention it deserves following your death or incapacity is by creating a pet trust. We can help you set up, fund, and maintain such a trust, so your furry family member will be properly cared for when you are gone.
6. Money for the care of a person with special needs: There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs. In fact, you can easily disqualify someone with special needs from much-needed government benefits if you fail to use the proper planning strategies. To this end, a will is not a suitable way to pass on money for the care of a person with special needs.
If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. Such trusts are complicated and the laws governing them can vary greatly between states.
If you have special needs family members, you should always work with an experienced planning lawyer like us to create a special needs trust. We can make certain that upon your death, the individual would have the financial means they need to live a full life without jeopardizing their access to government benefits.
Don’t take any chances
Although creating a will may seem fairly simple, it is always best to consult with an experienced planning professional to ensure the document is properly created, executed, and maintained. As we have seen here, there are also many scenarios in which a will is an inefficient planning option that will have your family in court and conflict.
Meet with us as your Life & Legacy Attorney, to discuss your specific planning needs. Together we can find the right combination of planning solutions to ensure your loved ones are protected and provided for no matter what. Schedule a Family Wealth Planning Session™ today to get started.
This article is a service of Reflections Life Planning LLC, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That is why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you have ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.