While a will is a key component of planning that most people should have, you may wonder what a will won’t do. Wills play an important role in estate planning, but they cannot handle every piece of property and every situation. Understanding the limitations can help you plan accordingly. Here are the things a will can’t do.
1. Provide Funeral Plans
While it is possible to include your funeral instructions in your will, one of the disadvantages of a will is that it is usually not located or read until days or weeks after the death. The best way to help your family plan your funeral is to pre-plan it yourself with the funeral home or leave separate written instructions and tell people where to find them.
2. Care For Your Pets
An animal cannot legally inherit from you, so leaving money to your pet in your will won’t ensure your pet will be cared for. If you would like to make certain your pet will be cared for after your death, you can leave money to someone who is willing to take the animal (and leave the animal to that person since a pet is considered property). You can also set up a special trust, called a pet protection agreement, to provide for the care of your pet. The agreement names someone who will care for your animal and places them in charge of using the funds for the pet’s benefit.
3. Transfer Certain Classes of Property
When learning what is a last will, you may be surprised to find that there are types of property that a will cannot transfer when you die. Property that is owned as joint tenancy, life insurance policies, retirement accounts, transfer on death accounts, or any property you have placed in a trust will pass upon your death automatically because of the way it is legally owned. Your will cannot affect these types of property.
4. Avoid Estate Tax
The federal government and some states apply an estate tax to estates that are valued over a certain amount (usually millions of dollars). Your will cannot avoid this tax using a will, but there are other ways to reduce estate taxes, such as some types of trusts.
5. Avoid Probate
Probate is the court procedure that validates a will and puts it in to motion. Probate can take many months and involves the expenses of an attorney, executor and court fees. If you create a will that is needed to transfer your property, probate cannot be avoided. Small estate proceedings are available in most states. These streamlined proceedings allow wills for small estates (usually under $100,000) to be processed quickly and with fewer fees.
6. Provide for a Child With Special Needs
If you have a child, spouse or other person you wish to provide for who has special needs, your will is not the vehicle to use for this. Instead, you will want to create a special needs trust that will hold money that is to be used for the person’s care without affecting their government benefits.
Because of these last will disadvantages, you can consider the following alternatives:
- Transferring property during your lifetime to family members or charities
- Setting up pay-on-death accounts that transfer ownership to the person you name upon your death
- Creating life insurance policies with chosen beneficiaries
- Naming your family as beneficiaries on your retirement accounts
- Establishing a living trust, which holds ownership to your property while you are alive, allows you to use the property during your life, and smoothly passes it to your beneficiaries after your death
- Creating other trusts, such as marital trusts and special needs trusts
While a will is often a good idea, you can choose to simply answer the “Do I need a will” question with “no.” Upon your death, any property that is not transferred using the options listed above will then be transferred using your state’s intestacy laws. A person who dies without a will is intestate and his property is divided among spouse and children (if neither exists, other relatives come into play), according to percentages established in statutes. If you do not have a big estate and do not have specific wishes about who gets what, this option may be right for you.
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