Are Wills Obsolete?

Planning for one's survivors and heirs is an important and very personal activity. Making the difficult time after death less stressful and more efficiently addressed is a laudable goal.
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No, wills are not obsolete but there are numerous ways to transfer at least some assets at death without the time, expense, and creation of public records that are involved in the probate of a will. Consider, for example, the lack of news coverage surrounding the details of Steve Jobs's estate. About the most that could be reliably said was that he apparently put his assets in trust funds.

All individuals contemplating either non-probate or probate transfers of assets need expert elder law and tax advice. Asset transfers prior to death may have implications for Medicaid eligibility, for example, and there is additionally the potential to inadvertently create undue income tax, gift tax, and estate tax problems.

This comment briefly and incompletely lists in no particular order five common ways to transfer assets at death without the probate of a will. This list is intended for general educational purposes only. It is not intended to provide legal advice. Always consult experienced legal and tax professionals in estate matters.

1.Transfer-on-death (TOD) designations. The 1989 Uniform TOD Securities Registration Act has been enacted by virtually all state legislatures. In an incomplete overview, it allows the non-probate transfer of specifically registered investment securities. While the owner retains full control during her or his lifetime, an official death certificate and appropriate identification by the named TOD beneficiary is all that is required to transfer ownership.

States are enacting legislation that allows transfer-on-death motor vehicle registrations, real estate (land) deeds, retirement accounts, and payable-on-death (POD) bank accounts. Unlike a traditional gift, documentation need not be delivered to the recipient to make it effective. Also, unlike a traditional gift, a TOD designation may be revoked at any time by the owner. Consider preparing, as a separate document, a durable power of attorney to allow the assets to be managed or sold in the event the owner becomes incapacitated. Consult an experienced attorney to determine what TODs or PODs are possible in a given state and if they are appropriate in a specific situation.

2.Joint ownership or survivorship designations. A variety of assets and land may be owned with such designations. These classic methods involve language such as, in a simplified example, "Jane or John" or "Jane and John as joint tenants with the right of survivorship." An official death certificate and appropriate identification by the designated survivor should suffice to transfer ownership at death. A potential problem with these designations is that a co-owner who is involved in a lawsuit or divorce or has other creditors' claims may lose ownership of his or her half of the property to an outsider. This outsider may be able to legally force the sale of the asset in order to divide its value.

3.Life insurance purchases in general. Life insurance proceeds are typically payable to a designated beneficiary without any will or probate procedure. However, one should consult a financial professional to determine if the purchase of insurance makes good investment sense and if there are any hidden taxation issues.

4.Gifts during one's lifetime. A living mentally competent adult may give away assets. However, be certain that the gift is completed according to law (intent, delivery, and acceptance are the classic elements). For example, an envelope that is found in the decedent's desk after death may not have been "delivered" and may fail as an attempt to make a gift. This issue may arise when there is a contradiction between the undelivered intended gift and the provisions of a will. For example, an undelivered envelope containing $1,000 is found in the decedent's desk. Written on the envelope is "Give to Adam Adams." However, a provision in the decedent's will states: "I bequeath all of my cash on hand to Sarah Smith." In a traditional analysis, the provision in the will would control the disposition of the cash in the envelope in spite of what is written on it.

Always be certain that all elder law and tax implications of making a gift are understood.

5.Trust funds in general. There are numerous varieties of trust funds, some effective while the creator is alive (inter vivos) and some effective upon death. Some may be revoked by the creator and some are irrevocable. Again, elder law, taxation, and specific circumstances must be considered in consultation with experienced professionals before undertaking this non-probate technique.

Wills have several advantages. One may transfer all assets within a single document. Consequently, there is not a fragmentary hodge-podge of documents that may not include everything that one owns. They are formal in the sense that the person making a will (testator) is declaring that he or she wants certain things done at death. They have a long history of legal interpretation that more recent asset transfer techniques may lack. Typically wills are created by an experienced and neutral professional and not by someone who might be selling a financial product.

Planning for one's survivors and heirs is an important and very personal activity. Making the difficult time after death less stressful and more efficiently addressed is a laudable goal. Wills are not obsolete, but may be supplemented by some common documents such as those mentioned above. Also always prepare, as separate documents, a medical power of attorney, durable power of attorney for financial matters, and documentation of life-support and organ donation medical desires.

This comment provides a brief and incomplete educational overview of complex topics and is not intended to provide legal, financial planning, or tax advice. Always consult experienced professionals when contemplating and executing your estate planning.

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