Even a Little Mistake Can Ruin Your Plan
Playwright George Bernard Shaw bequeathed a small fortune to anyone who would create a new, improved alphabet. Portuguese aristocrat Luis Carlos de Noronha Cabral da Camara divided up his estate among 70 people selected at random from the Lisbon phone book. Hotel owner Leona Helmsley left $12 million to her dog. Talk about unusual wills that result in major complications.
Odds are that your will is not quite as eccentric as any of these. But what you may not realize is that even a seemingly minor detail hidden in your will could subvert your planning, resulting in an unexpected allocation of your assets or other unintended consequences.
Here are six ways to increase the odds that your hard-earned assets will end up where you want them to…
• Work with an attorney who tries to understand your situation before he/she attempts to write your will. Some estate-planning attorneys try to fit nearly every client into a cookie-cutter estate plan rather than customizing documents to fit each client. The best way to make sure you choose a good attorney is to pay attention to how much time and effort a candidate spends trying to comprehend your situation before drafting any documents. Asking one or two quick questions about your assets is not enough.
Examples: The attorney should ask whether all of your heirs are good at handling money…how well they get along with one another…whether any of their marriages are struggling…whether any of them has major health problems or other special needs…and whether you have any specific goals in mind for your money, such as paying for your grandchildren’s college educations.
These detailed questions will make for a longer meeting and, possibly, a higher bill from the attorney—an extra 30 minutes of discussion might increase a lawyer’s bill by perhaps $100 to $200—but it’s an excellent way to determine whether this attorney intends to create a will that truly fits your situation, greatly increasing the odds that the will ends up doing what you intended it to do.
Strategy: If a friend (or relative) recommends an attorney, ask this friend how deeply the attorney dug into your friend’s family and financial situation. Check whether you can have an initial consultation without a fee.
• Outline your ideas before you meet with an attorney. Many people don’t put much thought into what they want their wills to do until they sit down in an attorney’s office. That forces them to make decisions on the fly, increasing the odds of oversights and ill-considered choices. Thinking things through in advance can be a money saver, too—it means that you won’t have to ponder every issue during a meeting with an attorney who likely bills by the hour.
Strategy: Several days before meeting with your attorney, jot down thoughts about which people and/or institutions you hope to leave your money to (include heirs and charities)…how you want your assets divided…concerns you have about any heirs’ ability to handle money responsibly…and any conditions you might wish to place on any of these gifts.
Do not delay this step until the day before the meeting or, worse, the day of the meeting. You want to give yourself time to reflect on what you’ve written.
• Draft a will that avoids conflict among your children. Rivalries and discord among grown siblings often flare up over a parent’s will—even in families where the children have gotten along well in the past. The will forces adult children to confront three emotionally difficult topics—their finances…their childhood memories…and their own mortality—at a time when they already are dealing with the emotions surrounding the parent’s death. Still, a properly constructed will can reduce the odds of running into these problems.
Strategy: Name someone other than one of your children as executor of your will. If you have more than one child, naming one of the children as executor sets this child apart from the others, inflaming resentments. Also, think up a distribution strategy for your personal possessions that is unquestionably equitable. This applies even to assets that have no monetary value. Example: If all of your children have fond memories of your countertop cookie jar that they used to run to after school but you leave it to the child who happened to ask for it first, this simple cookie jar might become a source of family strife. Instead, you could set up a lottery in which each heir chooses from among your possessions in turn…or instruct your executor to sell off all of your personal possessions at an estate auction—your heirs can bid at the auction if they wish to.
• Take extreme care with specific bequests. Bequests—special listings in wills that name particular beneficiaries for specific items or assets—often lead to undesired outcomes. If an item listed among your bequests is sold or given away before you pass away (this happens more often than you might think), it could create confusion or conflict among your heirs. Rising or falling asset or estate values could make any particular bequest much more substantial—or less substantial—than you intended.
Example: A man has a $1 million estate at the time he writes his will. In it, he leaves a bequest of $50,000 to a favorite niece, with the remainder divided among the man’s three children. But living expenses, medical bills and investment losses reduce the value of this man’s estate to just $100,000 by the time of his death. Because of the bequest, this niece now gets half of his estate, with his children sharing the other half, which is very far from what he intended.
Strategy: Avoid bequeathing specific dollar amounts if possible. If you do include them in your will, work with your attorney to create a formula that minimizes the odds that they will bring unintended consequences. Example: Rather than leaving “$50,000,” you might leave “$50,000 or 5% of my estate, whichever is less.” Review your will periodically, and remove any bequests of possessions that you no longer own.
• Know what won’t be distributed by your will. Your will probably won’t determine who gets your share of jointly held property—that generally passes to the property’s co-owner. It probably won’t determine who receives assets from retirement accounts…US Savings Bonds that name a co-owner or beneficiary…proceeds of any life insurance policies—these generally pass to whomever is designated in the account, bond or policy.
Strategy: Review account beneficiary designations every year or two to confirm that these assets will be distributed according to your current wishes. Confirm that the overall distribution of your assets is what you intend after jointly held property and beneficiary designations are taken into account.
• Pay a second attorney to review your will. This is a great way to catch potential problems. For most wills, it will take only an hour or two of an attorney’s time to read the document and weigh in with any concerns. It’s worth the price for the peace of mind.
Alternative: If you don’t want to pay extra for a second opinion, hire a different attorney when the time comes to update your will. Wills should be reviewed and updated every few years and after any major family status change—a marriage…divorce…the death of a spouse…or birth of a child, for example. You would have had to pay your original attorney to do this update anyway, so you might as well hire someone different and turn that into a second opinion.