Is A Will Enough? Here’s What It Can’t Do
Most families think that once they have a will, the job is done. It’s easy to assume that you’re covered once the documents are signed and filed away. The harsh reality of the situation is that when things happen, families often come to the realization that there is much the will did not do.
If you’ve made a will, consider this a checklist for what comes next.
Understanding What You Actually Signed
A will is a legal document that tells a court what you want to happen to your assets after you die. A will does not keep your family out of court and away from probate. In Texas, a will guarantees probate, which can take months, cost thousands, and freeze assets while giving the public access to your documents.
A will also only controls what’s in it and does not uphold anything that you’ve said. If you told someone that you were leaving them your car but your will doesn’t reflect that, the person may contest your will in court. Wills contests are more common than people tend to realize and even successful contests add costs, delays, and conflicts to an already difficult time.
A will does not control assets with beneficiary designations. Your retirement accounts, life insurance, and bank accounts with transfer on death designations will pass outside your will entirely, to the name you put on the form you filled out, even if it was filled out years ago.
A will is not a complete plan and does nothing if you’re incapacitated rather than dead. If something happens to you and you are unable to make decisions for yourself, your will does not activate. Your family may have no legal authority to make medical decisions or manage your finances on your behalf without having to go to court first.
Step 1: Beneficiary Designations May Override Your Will
Many people do not realize that certain assets are distributed according to beneficiary designation forms rather than the instructions contained in a will. Retirement accounts, life insurance policies, and accounts with transfer-on-death or payable-on-death designations can pass directly to the individuals named on those forms.
This distinction is important because beneficiary designations generally control the distribution of those assets, even when the beneficiary designation conflicts with the provisions of a will. The instructions on the account or policy may determine who receives the asset without regard to what the will provides.
Common issues can arise when beneficiary designations are not regularly updated. For example, a former spouse may remain listed as a beneficiary after a divorce, a named beneficiary may have passed away, or a minor child may be named directly without appropriate planning for how the inheritance will be managed.
For this reason, retirement accounts, life insurance policies, and accounts with transfer-on-death or payable-on-death designations should be reviewed periodically. Each account should have appropriate primary and contingent beneficiaries who reflect the individual’s current family circumstances and estate planning goals.
A will does not necessarily control assets with beneficiary designations. Those designations should be reviewed as an essential part of any comprehensive estate plan.
Step 2: Determine Whether Your Trust is Properly Funded
Having a trust is only part of the estate planning process. An important question is whether the assets intended to be governed by the trust have actually been transferred into it.
Signing a trust document establishes the legal structure of the trust, but transferring assets into the trust, commonly referred to as funding the trust, is a separate step. If a home, bank account, investment account, or other asset remains titled solely in an individual’s name rather than being properly transferred or otherwise coordinated with the trust, that asset may still be subject to probate.
This is one reason that simply having a trust document does not necessarily accomplish an individual’s estate planning goals. A trust that has not been properly funded may not provide the intended benefits.
Anyone who has established a trust but is uncertain whether it has been properly funded should review the ownership and beneficiary designations of the assets intended to be included in the trust.
Signing a trust does not automatically transfer assets into it. Proper funding is a separate and essential component of trust-based estate planning.
Step 3: Understand That a Will Does Not Address Incapacity
A will generally addresses the distribution of assets after death. It does not provide a complete plan for circumstances in which an individual is alive but unable to make financial or medical decisions.
A comprehensive estate plan should address incapacity through separate legal documents. Depending on the individual’s circumstances and state law, these may include a durable power of attorney for financial matters, a medical power of attorney for medical decisions, and an advance directive or living will addressing certain end-of-life medical preferences.
A HIPAA authorization may also be appropriate. This document allows designated individuals to obtain medical information from healthcare providers when the individual is unable to communicate or provide authorization personally.
Without appropriate incapacity documents, family members may face significant difficulties when attempting to manage financial affairs or obtain information and make healthcare decisions on behalf of someone who cannot do so themselves.
A will is an important estate planning document, but it only addresses part of the picture. A complete plan should also account for what happens if an individual becomes incapacitated during their lifetime.
Step 4: Keep Your Estate Plan Up to Date
Estate planning is not a one-time event. Families, finances, relationships, and circumstances change over time, and an estate plan should be reviewed accordingly.
Regular reviews can identify changes that may affect an existing plan. Beneficiary designations may need to be updated, newly acquired property or accounts may need to be coordinated with a trust, and the individuals named to serve in financial, medical, or guardianship roles may no longer be the most appropriate choices.
Major life events can also create a need for review. These may include marriage, divorce, the birth or adoption of a child, the death of a beneficiary or person named in the plan, a significant change in assets, or a move to another state.
Many estate planning problems are not caused by a plan being created inadequately. Instead, they develop when a once-appropriate plan is never updated as circumstances change over time.
An estate plan should evolve with the people and circumstances it is designed to protect. Periodic reviews can help ensure that the plan continues to reflect current wishes and circumstances.
Why Having a Will Alone May Not Be Enough
Creating a will is an important step. However, a will is only one component of a comprehensive estate plan.
A complete review should consider more than the document itself. It should also address beneficiary designations, ownership of assets, trust funding, incapacity planning, and the individuals selected to make financial and medical decisions when necessary.
Estate planning also involves understanding the responsibilities assigned to the people named in these documents. A successor trustee, executor, financial agent, healthcare agent, or guardian may have significant responsibilities, and selecting the appropriate person requires more than simply filling in a name.
The effectiveness of an estate plan ultimately depends on whether the various documents, asset titles, and beneficiary designations work together to accomplish the individual’s goals.
Estate planning is about more than having a folder of signed documents. A comprehensive plan should be structured, coordinated, and periodically reviewed to help ensure that it functions as intended when it is needed most.
A well-prepared estate plan is more than a will or a collection of signed documents. It is a coordinated plan designed to protect your assets, provide for the people you care about, and help ensure your wishes are carried out when they matter most. If you are unsure whether your beneficiary designations are current, your trust is properly funded, or your incapacity documents are complete, now is a good time to take the next step.
Give us a call at (830) 609-8422 to schedule an appointment! A conversation today can help identify potential gaps and give you greater confidence that your plan is prepared for whatever the future may bring.
