Paul Horton: Mistakes When Making a Will

Making a last will and testament is a very wise decision. It tells your surviving loved ones exactly what your wishes are regarding your property and assets. When it comes to estate planning however, there are some things that you can’t or shouldn’t include in your will.

Types of property you can’t include when making a will

Some types of property carry rules that govern what happens after you die. These rules are independent of your will, mostly because the nature of these types of properties is to name a beneficiary or avoid probate.

Joint tenancy property. This type of property grants the right of survivorship to your joint tenant, automatically by law. Therefore, when you die, your share of the property passes directly to the surviving joint tenant, regardless of what your will says.
Property in a living trust. One of the ways to avoid probate is to set up a living trust. The property included in a living trust avoids probate; whereas property in your will does not. Additionally, willing property to someone in your will when that property is already delegated to someone by a living trust is inconsistent. The property in the living trust automatically goes to the beneficiaries and is managed by the trustee. If you want to change this arrangement, you must do it through the trust forms and documents and not through your will.
Life insurance proceeds that have a beneficiary. In this case, like with the trust, the proceeds automatically go to the beneficiary.
Retirement plan proceeds, including money from a pension, IRA, or 401(k). The forms for these plans contain a section for you to include your desired beneficiary.
Stocks and bonds held in beneficiary. This is yet another type of property that automatically goes to your named beneficiary. Talk to the brokerage company if you wish to change the named beneficiary.
Proceeds from a payable-on-death bank account. The form for this account asks you to name your beneficiary. To change the beneficiary, you just fill out another form with your bank.

Avoid leaving funeral instructions when making a will

Usually, the settling of the estate and the probate proceedings do not happen until after the funeral. The funeral arrangements are among the first matters of business after someone dies. Therefore, people may not even notice your funeral wishes stated in your will until after the funeral. Instead of leaving your funeral wishes in your will, talk with your loved ones about what you want. You can even make a separate document that spells out your wishes for the funeral, and give this document to the executor or executrix of your estate.

Avoid using a will to escape estate taxes

A will is still subject to estate taxes. Instead of trying to use a will to avoid the often heavy estate taxes, explore different types of trusts that may work for your situation. Trusts escape a lot of tax subjection, because the property is not passing directly to the beneficiary, rather to the trust account, over which the beneficiary does not have complete control.

Wills do not escape probate

A common misconception is that wills do not have to go through probate proceedings. This is not true. Wills are still subject to probate proceedings. Probate proceedings can take months. However, having a will does help to speed up the probate process, because your loved ones, lawyers, and the probate court are not left having to divide all of your property for you. You have already explained how it should be divided, and the court will follow your wishes. There are other ways you can avoid probate. One common way is leaving the property to a trust fund, with the desired recipient a beneficiary, instead of granting the property directly to that person.

Be careful with what conditions you put on gifts

Not all of those conditions are legal. Conditions that include marriage, divorce, or the change of the recipient’s religion cannot be provisions in a legal will. Therefore, a court will not enforce them. You can put certain other types of conditions on gifts. Usually, these types of conditions are to encourage someone to do or not do something. For example, when making a will, you could say, “to Allison, if and when she graduates from college.” You could also say something like, “to Paul, so long as he uses the property as an art studio.” Just keep in mind that putting conditions on gifts can complicate things. Think about who will actually enforce these conditions, for how long, and does the enforcer get anything like an executor’s fee?

Avoid leaving gifts or money for illegal purposes

Although this is uncommon, some people will try and sneak in some sort of illegal condition or purpose for the gift. This would not make your will a legal will. For example, you wouldn’t be able to include, “to Mary, so long as she uses the property to grow marijuana,” or “To Jane, so long as she has her first beer before she is 21 years old.”

Do not arrange care for a special needs person when making a will

Although it is very possible to arrange such special needs for a disabled person, a will is not the place in which to do it. You need to to a trust. There are certain types of trusts, such as a special needs trust, that specifically address the management of the specific special needs of a disabled person.

Avoid leaving gifts to pets in a will

Animals do not have the legal capacity to own property. What many people do instead is they leave the pet with someone who they know will provide it with good care. You can also leave that person any property or money to help out with the care of the pet. Certain states do allow for trusts with an animal as the beneficiary. If this makes you more comfortable, check to see what your state’s laws are. However, as long as you believe in the person you are leaving your pet with, you probably do not need a pet trust fund.