Limitations Of A Will In An Estate Plan
When you think of estate planning, a Last Will and Testament likely comes to mind. It’s one of the most important documents you can have, but it comes with limitations. A Will is just one piece of estate planning and shouldn’t be the only document you use.
What Is A Will?
A Will is a guide to your loved ones that states who should receive your property after you pass away. It allows you to name a Personal Representative who will manage your estate and name a guardian for any minor children. If you do not have a Will, your estate will be administered according to Michigan’s intestacy laws, and you may disagree with how everything is distributed. Any property that is distributed through a Will must pass through probate court.
Does All Property Pass Through A Will?
Though a Will is a good way to transfer your property after death, not all property must pass through it. The following are examples of property that do not need to pass through probate:
- Property held jointly: If the decedent owned property with another person as “joint tenants with rights of survivorship,” then the property doesn’t need to pass through probate.
- Property in a Trust: If a Trust owns a property, then the property will be distributed to the Trust’s beneficiaries.
- Pay on Death Accounts: With a Pay on Death account, also known as a Transfer on Death account, the account will automatically be distributed to the listed beneficiaries when the owner dies.
- Life Insurance: If you name a beneficiary on your life insurance policy, the insurance will payout to the beneficiary and won’t pass through your Will or probate court.
- Retirement Plan: Like life insurance, retirement accounts (IRA, 401k, etc.) have a named beneficiary and do not pass through the Will or probate court.
- Investments in Transfer on Death accounts: On occasion, some stock and bond accounts have a named beneficiary. The accounts will transfer automatically at the owner’s death and bypass the probate court.
What Should Not Be Included In A Will?
A Will does not cover all aspects of estate planning. Below are a few items you cannot and should not include in a Will.
- Funeral Instructions: Many family members won’t find or look for your Will until weeks or months after your passing. Because of this, a Will is not the best place to leave your wishes, considering how quickly funerals happen after death.
- A provision for special needs children: If you pass away and want to leave a large sum of money to your special needs child, a Will may not be the best estate planning tool to use. If they receive the inheritance directly, you may disqualify them from receiving government benefits. Due to this, it’s better to create a Special Needs Trust for the child.
- A provision for your pets: You cannot leave money for a pet in a Will. You can name a caregiver for the pet and provide them with money to care for it, but the caregiver may not actually use the money for that purpose. If you’re worried about providing for a pet, a Pet Trust may be the best option.
A Will should not be the only part of your estate plan. To make sure your estate plan is robust and covers all of your bases, you should consult with an experienced Estate Planning Attorney.
Just give us a call at (248) 613-0007 to schedule your initial consultation.