Have you made a will? If you have, when was the last time you reviewed it? In this article, based on a webinar with legal expert Kevin Farrelly, you’ll learn more about the process behind making wills.

Understanding the Estate Planning Process and the Role of Wills

Wills are an essential part of the estate-planning process. The goal is to create a will that effectively serves the client’s needs.

While clients often request “simple wills” to save money, a thorough understanding of the client’s overall financial picture is crucial for proper estate planning. A simple will cannot be drafted in a vacuum.

Step 1: Gather Essential Client Information

Gathering comprehensive information is the first step of writing a will. This includes:

• Family details: spouse, children, siblings, and next of kin.
• Legal agreements: prenuptial agreements and divorce decrees.
• Special needs beneficiaries: individuals receiving government assistance.

Understanding these factors ensures the will aligns with the client’s wishes and avoids unintended consequences.

Step 2: Assess Client Assets

Next in making a will is identifying and understanding the client’s assets. Key areas to explore include:

• Real estate: primary residence, vacation homes, and international properties. Note the complexities of international property ownership and inheritance laws.
• Retirement accounts: qualified retirement accounts and beneficiary designations. Beneficiary designations are crucial to avoid unwanted tax consequences.
• Other accounts: investment accounts and bank accounts, including ownership and beneficiary information.
• Tangible personal property: artwork, jewelry, collectibles, and other valuable items. Listing items of modest value in the will can be problematic. Consider using a separate letter for these items.

By the way, here is a video recording of the 1:09-hour conversation with Kevin Farrelly.

Determine Testamentary Substitutes

Wills detail how a client wants assets to be allocated upon death. However, be aware that alternatives to wills for transferring assets exist, such as:

• Joint ownership: assets owned jointly pass automatically to the surviving owner.
• Beneficiary designations: accounts with designated beneficiaries transfer directly to those individuals.
• Transfer on death (TOD) deeds: for real property in New York (excluding co-ops).
• Revocable living trusts: allow for asset management during life and distribution upon death. However, they do not offer estate tax savings.

Regularly review beneficiary designations to ensure they reflect current wishes.

Step 3: Making Wills Takes into Account Estate Tax Considerations

Understanding estate tax implications is vital as these can vary depending on the state you live in. Your attorney will help you navigate this landscape and, depending on the situation, may recommend a trust.

Trusts in Estate Planning

Here are key points to consider when it comes to trusts:

• Federal estate tax exemption: It is currently high but subject to change. The future of the estate tax depends on the political landscape.
• Portability: unused exemption from the first spouse’s estate can be carried over to the surviving spouse (federal only).
• New York estate tax: lower exemption than federal, no portability, and a “cliff” rule.
• Santa Claus provision: a strategy to mitigate the New York estate tax “cliff”.
• Apportionment: determining how estate taxes are paid. Clients can often control this through their will.

Different types of trusts serve various purposes:

• Revocable living trusts: a testamentary substitute created during life.
• Marital trusts: protect assets for the benefit of children from prior marriages.
• Disclaimer trusts: allow the surviving spouse to disclaim inheritance for tax or other reasons. Disclaimers must be made within 9 months of death.
• Credit shelter trusts: utilize the deceased spouse’s unused estate tax exemption to benefit the surviving spouse and children tax-free.
• Trusts for minors: These protect assets for children until they reach a specified age.

Step 4: Fiduciaries and Other Important Considerations

These are the key roles and clauses in estate planning:

• Executors: manage the estate’s assets and fulfill the will’s instructions.
• Trustees: manage assets held in trust.
• Inter vivos clauses: deter will contests.
• Power of attorney, healthcare proxy, living will, and designation for bodily remains: essential documents for comprehensive estate planning.

You’ll want to think through who can best play these roles if needed.

Estate planning is more comprehensive than simply creating a will.

Step 5: Probate and its Alternatives

When making your will, you’ll want to understand what probate entails and what alternatives are available to you.

Probate is the legal process of administering an estate. While not always burdensome, it can be complex and time-consuming.

Alternatives like living trusts can significantly reduce or eliminate the need for probate. If assets are held in joint ownership or with beneficiary designations, they typically bypass probate.

Tips for Making Wills: Final Thoughts

Getting back to how we started this article, where are you in the process of making wills? Have you completed your estate planning?

Seeking professional legal advice is crucial for effective estate planning. Don’t delay in addressing your estate planning needs.

Let us know if you have unanswered questions.

Thanks for reading.

Note: This blog article is intended for general informational purposes only. Nothing in it should be construed as, and may not be used in connection with, an offer to sell or a solicitation of an offer to buy or hold an interest in any security or investment product. Investing involves risk.

This article does not constitute legal advice and is only provided for general informational purposes.  Please seek legal advice before drafting a will.

Art Credit: Vignet met het Nieuwe Testament, draughtsman: Bernard Picart, 1709, Rijks Museum