The Tools Of Estate Planning - The Last Will and Testament

It is very common these days for third party advisors of every description (insurance advisors, accountants, church groups, foundation officers, brokers, etc.) to recommend a Will. Questions like “do you have a Will”; “have you updated your Will?” are frequently asked.

While I agree that a Will is an important fundamental “tool” in the Estate Planning tool bag, I take a more contrary view. Misconceptions about Wills are the most common of all misunderstandings in this arena. I continue to be impressed, in this “information age” at how much misinformation or just misunderstanding exists about Wills.

Lets consider some fundamental points about Wills:

● Wills do not avoid Probate! Indeed, a Will is simply as set of written instructions to the Probate Court (or more correctly, to the “executor”), on how the Probate Process should be handled.

Clients are often dumbfounded when they learn that even with the Will they spent so much time (and often money) to have done the estate still must be probated.

● Wills do not always do what you think they will do. A Will only governs assets which are subject to probate. Too often, over the years, I have had to explain to a client that, even though mom or dad’s Will clearly divides their asset equally among all the children, the division legally will not happen that way. While there are certainly circumstance in which this is intentionally done, it is often a matter of misunderstanding by the client making the Will about how the law works. Insurance policies pay to the designated beneficiary, usually without regard to the terms of the Will. Assets that are owned jointly with one or more other persons often go to the joint owner, outside of probate and again, without regard to the terms of the Will (this is often the case in a joint bank account, or an account which designates a “pay on death” or “transfer on death” beneficiary).

● You already have “a Will.” The Michigan Legislature (as has most states) has considered how the “typical” person would want their assets distributed. The Michigan Estates and Protected Individuals Code (EPIC) directs the distribution of assets of a person who died without a Will (a term or condition known as “intestacy”). My problem with that is that I have not met that “typical” person in my 25 years of helping clients with their Estate Planning. The statue simply makes some assumptions which are often not reflective of clients’ desires. Ironically, in other cases, clients go through a significant amount of angst and effort to create a Will that does not differ substantially from this statutory scheme (in other words, they spend time and money on a Will which really doesn’t accomplish much for them).

I am not saying a Will is a “bad” thing, or that you should not have one. We always recommend a Will as part of the overall Estate Plan. There are some very important functions of a Will:

● A Will gives you the opportunity to direct the Probate Process the way you want it to be done -- if there is a need for Probate for some reason.

● With a Will, you choose the executor (in Michigan, called a Personal Representative).

● A Will remains an effective way to nominate guardians for minor children.

● In situations where there is a taxable estate or income tax issues, the IRS (and state treasury) will look to the language in the Will for the handling and apportioning of taxes.

● There are special situations (e.g., in certain Medicaid circumstances) where using a Will and creating a “Testamentary Trust” may be preferred.

● A Will can be used as a “catch all” and a curative document to “repair” situations that do not occur as planned (for example, we recommend a “pour-over” Will whenever a client creates a revocable living trust).

In summary, while there are instances in which a Will is appropriate as the tool of disposition in an Estate Plan, there are commonly better methods and the Will becomes an important supporting and backup tool as part of the overall Plan.

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