What Your Will Can and Can Not Do (Hint: It's Not a Magic Wand)

A will is a legally binding directive stating who will receive much of your property upon your death. Having a will allows you to appoint a legal representative or executor to carry out your bequests and name a guardian for your children. If you die without one (intestate), the state will distribute your assets and property via state law and quite possibly at odds with your wishes. Thus, a will is an important part of a comprehensive estate plan. However, a will isn't a magic wand that controls everything; you should be aware of some limitations.

What Can it Cover?

Although a will can be the primary mechanism to transfer property on death, it does not cover all property situations. Some classes of property you are unable to distribute through a will are:

• Property held in trust – A trust has named beneficiaries who receive the trust's property according to the trust terms and not based on what is in your will (unless specifically stated in the trust).
• Pay on death accounts – Informally known as PODs, the original account owner names a beneficiary(s) to whom the assets in the account pass automatically upon the owner's death.
• Life Insurance – Life insurance benefits pass to your named beneficiary(s) in the life insurance policy and are not affected by your will (unless you fail to name a beneficiary).
• Jointly held property – Co-owned property is not distributed through your will if there is a survivorship interest in the joint ownership. Joint tenants with rights of survivorship typically have an equal ownership interest in the property, and when one joint tenant dies, that interest ceases to exist. The other joint tenant now fully owns the entire property.
• Retirement plans – In a similar manner to life insurance, money in an IRA or 401(k) passes to the named beneficiary(s) (again, (unless you fail to name a beneficiary). According to federal law, a surviving spouse is generally the automatic beneficiary of a 401(k); however, there are some exceptions. An IRA permits you to name almost anyone as the beneficiary(s).
• Investments in transfer on death accounts – Some accounts holding stocks and bonds will transfer on death to a named beneficiary(s). Like POD accounts, transfer on death accounts bypass probate and go directly to the beneficiary(s).

Limitations of a Will

A will does not allow you to avoid probate.

By necessity, a will must go through the probate process in order to allow beneficiaries to inherit property that requires a change in title. Depending on the state and county, it can take months to get through probate, and it usually involves expenses like fees for an attorney and court costs. Also, your will and everything associated with it (property you own as listed in an inventory, who your beneficiaries are, etc.) likely become part of the public record that anyone can access.

Keep funeral instructions outside of your will.

The reality is your funeral may have already taken place before someone finds and reads your will, which can take day or even weeks. If your funeral or memorial service is important to you, the best way to help your family is to pre-plan, making arrangements with a funeral home. You can leave written instructions with the family as to your plans. In most McCreary Law Office plans, you are provided a worksheet to guide you in this planning, and you'll designate the person who will be in charge of handling the arrangements and making decisions.

Your pets cannot inherit through your will.

An animal is legally unable to inherit money or property from you. If you want your pets to be cared for after you die, leave money to a person willing to take care of your animals. The person you select can inherit your pets since a pet is considered property. You can also set up a pet trust or a pet protection agreement, either of which provides for your pet's care.

Provisions for a child on government benefits are best in a trust.

It is best to create a special needs trust to provide for a child with special needs or a child who is receiving government benefits. The trust can hold money for your child’s care without affecting those benefits.

There are ways to circumvent the limitations of a will by creating trusts, setting up pay-on-death accounts, and ensuring a beneficiary is named on all accounts that permit them. Your will is an important component of a comprehensive estate plan, but it can't do everything.

I would be happy to discuss the pros and cons of having a will and other options available to you as part of your overall estate plan. Please contact McCreary Law Office or call the Jacksonville, FL office at 904-425-9046 or the Houston, TX office at 713-568-8600.