There are a lot of misconceptions about how estate planning works. Here are a few fun facts to share at your next dinner party.
- You already have an Estate Plan. Don’t have a Will or Trust? The state in which your assets are located already has an estate plan in place for you. Every state, including California and Hawai’i, has laws that govern the distribution of a Decedent’s assets when they pass intestate (without a Will). Good news? Probably not. Even if your intentions exactly match the state laws, it’s going to cost more in legal fees and take longer for those assets to be distributed than if you had a Will or Trust in place at the time of your passing.
- There is No Required “Reading of the Will” After Death. We all love that dramatic movie scene where the family is gathered to hear the Decedent’s last wishes. You can cut the tension with a knife. In real life, that formality is not required and is almost never done. It is important that family members — particularly those whom you have selected as your personal representative — are aware of the location of your Will and how to access it after your passing. Typically, they will review your estate plan after your memorial services and discuss with an attorney on how to proceed.
- Putting your Burial Wishes in Your Will May Not Be the Best Place. There is certainly nothing wrong with outlining your specific burial wishes in your Will. We have seen plenty of Wills that do this. But if you were paying attention to #2 above, you are now realizing that many grieving family members don’t get around to reading your estate plan until after the memorial services. This can lead to some awkwardness if your burial plan has not been carried out. A better practice is to let those close to you know your wishes, and provide for these in a separate document just in case people do not get around to reading your Will until after the services have been planned, or actually taken place.
- Divorce Automatically Revokes a Will. Unless a Will expresses intentions to the contrary, under both California and Hawai’i law, divorce automatically revokes any Will. However, divorce will not automatically change beneficiary designations in IRAs, life insurance policies, annuities, or retirement plans. If you forget to change these, your former spouse may receive these benefits if you previously designated him or her as the beneficiary before you divorced.
- A Will Does Not Give Authority to Transfer Property. Before beneficiaries can change title to property, the Will must first be filed in Probate Court. The Court will eventually authorize the transfer of title. If you are aware that you have been named the beneficiary of certain assets in a Will, you should hold off making any definite plans until the Court grants authority to transfer the property to you.
- Even a Valid Will May Not Control All the Property Designated in the Will. A person can only bequeath what they own. If a Will names property that the Decedent doesn’t solely own, you might not receive it if you are the named beneficiary in a Will. For example, a Will does not affect assets with a joint owner, or a proper beneficiary designated by contract, such as a life insurance policy. A Will also does not affect property held in a Trust, as that property is no longer titled in the Decedent’s name.
- You Can Use a Will to Nominate a Guardian for Minor Children. State law allows parents to nominate a guardian for a minor child. The designated guardian assumes parental responsibilities for minor children in the event the parents become incapacitated or deceased. Guardian provisions are often drafted into a Will, as opposed to other estate planning documents. One reason may be because of the stringent formalities required for a Will to be valid. The Will is the only estate planning document that is commonly witnessed by two separate people, both of whom have their witnessing signatures notarized.
- The Probate Procedures are Optional. Much of estate planning is designed to avoid the Probate Court for a variety of reasons: cost, time, tax planning, etc… While every estate plan typically includes a Will, Probate Court proceedings only control a Decedent’s assets that are solely titled in the Decedent’s name. So, if all a Decedent’s assets have a joint owner or a named beneficiary, or are owned by a Trust, Probate proceedings can be avoided. Because joint ownership can have unintended gift tax and creditor consequences, the use of beneficiary designations and Trusts are commonly recommended to avoid Probate Court.
- Avoid Leaving Gifts to Pets in a Will. Animals lack legal capacity to own property. If you want to care for a pet after your death, you can set up a Pet Trust. This can identify the person, or persons, who will care for the pet after your passing and the assets that will be used to pay for this care. When the pet passes, any remaining assets in the Trust can be passed to an individual or a charity.
- Illegal Bequests Are Not Honored. Occasionally some people attempt to slip in a bequest condition that is improper and cannot be enforced. Conditions that include marriage, divorce, or that make requirements on religious beliefs will not be enforced by the courts.
Takeaway
Do you have an estate plan in place that matches your needs? Contact CASHMAN LAW today for a free consultation to see how we might help eliminate the confusion in this sometimes-confusing process.
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