A will is one of the most basic tools to use when planning your estate, and even within the most complex plans a will is often included in one form or another. A will is used to designate how you want your assets distributed to your surviving loved ones upon your death. If you die without a will, state law governs how your assets are distributed, which may or may not be in line with your wishes.
However, as key as a will is in planning your estate, there are some assets that cannot or should not be included in a will, so it is important for you to understand which assets and why they should be left out and placed in other planning documents, like trusts.
While you should always consult with an experienced planning professional like us when creating your will, here are a few of the different types of assets that should not be included in your will.
1. Assets with a right of survivorship: A will only has authority over assets solely owned in your name. Therefore, property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship, bypass your will. These types of assets automatically pass to the surviving co-owner(s) when you die, so leaving your share to someone else in your will would have no effect. You will need to change title to the asset when you begin planning your estate if you want someone other than your co-owner to receive your share of the asset upon your death.
2. Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity and cannot be passed through your will. In contrast, assets included in a will must first pass through the court process known as probate before they can be transferred to the intended beneficiaries. To avoid the time, expense, and potential conflict associated with probate, trusts are typically a more effective way to pass assets to your loved ones compared to wills.
However, because it can be difficult to transfer all of your assets into a trust before your death, you’ll probably still need to create what’s known as a “pour-over” will to work alongside your trust. With a pour-over will in place, all assets not held by the trust upon your death are transferred, or “poured,” into your trust through the probate process.
Meet with us for guidance on the most suitable planning tools and strategies for passing your assets to your loved ones in the event of your death or incapacity.
3. Assets with a designated beneficiary: Some types of assets allow or require you to name a beneficiary to inherit the asset upon your death. So, similarly to assets held in a trust, the asset passes directly to the individual, organization, or institution you designated as beneficiary when you die, without the need for any additional planning.
The following are some of the most common assets with beneficiary designations, and therefore, such assets should not be included in your will:
● Retirement accounts, IRAs, 401(k)s, and pensions
● Life insurance or annuity proceeds
● Payable-on-death bank accounts
● Transfer-on-death property, such as bonds, stocks, vehicles, and real estate
4. Certain types of digital assets: Because of their unique nature, digital assets require special plans outside of your will in order to be properly passed to your beneficiary. In fact, there are some cases—including Kindle e-books and iTunes music files— where it may not even be legally possible to transfer the asset via a will, because you never actually owned the asset in the first place. In these cases, you merely owned a license to use it.
Going beyond that, some types of social media such as Facebook and Instagram have special functions that allow you to grant certain individuals access and/or control of your account upon your death. In these cases, a will would not be of any use. Always check the terms of service for the company’s specific guidelines for managing your account upon your death.
Regardless of the type of digital asset involved, NEVER include the account numbers, logins, or passwords in your will, which becomes public record upon your death and can be easily read by others. Instead, keep this information in a separate, secure location, and provide your fiduciary with instructions about how to access it.
If you have any doubts or concerns, play it safe and meet with us for more detailed guidance and support with properly including digital assets in your plan.
5. Your pet and money for its care: To begin with, you cannot name a pet as a beneficiary in your will because animals are considered personal property under the law. If you were to do so, whatever money you leave it would go to your residuary beneficiary (the individual who gets everything not specifically left to your other named beneficiaries) instead, and they would have no obligation to care for your pet.
Similarly, if you were to use your will to leave your pet and the money for its care to a future caregiver, they also would have no legal obligation to use those funds to care for your pet. There would be nothing stopping them from pocketing the money and dropping your precious pet off at the local shelter.
The best way to ensure your pet gets the love and attention it deserves following your death or incapacity is by creating a pet trust. We can help you set up, fund, and maintain such a trust, so your inhuman family member will be properly cared for when you’re gone.
6. Money for the care of a person with special needs: There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs starting with the fact that you can easily disqualify them for much-needed government benefits if you don’t use the proper planning strategies. Because of this complexity, a will is not a suitable way to pass on money for the care of a person with special needs.
If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. However, such trusts are complicated, and the laws governing them can vary greatly between states.
Given this, you should always work with an experienced planning lawyer like us to create a special needs trust. We can make certain that upon your death, the individual would have the financial means they need to live a full life, without jeopardizing their access to government benefits.
Don’t take any chances
Although creating a will may seem fairly simple, it’s always best to consult with an experienced planning professional to ensure the document is properly created, executed, and maintained, and as we have seen here, there are also many scenarios in which a will would not be the right planning option.
With this in mind, you should meet with us, as your Personal Family Lawyer®, to discuss your specific planning needs, so we can find the right combination of planning solutions to ensure your loved ones are protected and provided for no matter what. Schedule a Family Wealth Planning Session™ today to get started.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.