National Make-A-Will Month
August is known as “National Make-a-Will Month.” It’s also National Dog Month, National Hair Loss Awareness Month, and International Peace Month. I love dogs, hope to keep what’s left of my hair, and, while I can’t do much about international peace, I do have insights to share about making a will.
The Importance of Estate Planning
According to a recent report from Trust & Will, only 31% of Americans have a will. Wills play a vital role in estate planning, yet even fewer Americans have both a will and a revocable living trust. A living trust is designed to manage your assets while you are alive, protect them if you become ill or incapacitated, and facilitate the smooth transfer of those assets after your death.
Will vs. Living Trust: What’s the Difference?
Until recently, I was equally passionate about recommending either a will or a combination of a will and a living trust. What’s the difference—and what would I recommend today?
A will is a set of instructions for the probate process, which is supervised by the court to transfer property from the deceased to the beneficiaries. Probate only applies to assets owned solely in an individual’s name.
If clients choose trust-based planning, their assets must be retitled in the name of the trust. Assets owned by the trust avoid probate entirely. There are additional benefits to having a trust: it can help with asset management, disability planning, and asset protection. I especially recommend revocable living trusts for single adults, older clients, those with high net worth, and families with members who have special needs.
Typical Assets and Probate
Many of my married clients have similar estates: a jointly owned home, savings in a joint brokerage account, retirement accounts, and possibly a car they own or lease, as well as an individual checking account. Of these, only the individually owned checking account or car would be subject to probate.
The house passes automatically to the surviving joint tenant. A joint brokerage account becomes the sole asset of the surviving owner. Retirement accounts usually have beneficiary designations, and leased cars are owned by the lender, not the driver. For many married couples, when the first spouse dies, there may be no probate or only a small probate.
The Role of the Will After the Death of the Surviving Spouse
Upon the death of the surviving spouse, assets owned only in their name become probate assets. In these circumstances, the will becomes critically important, guiding the personal representative and the court in marshaling and distributing the estate’s property. The will may direct tax elections, compensation issues, methods for distributing personal items, and contingency plans if an intended beneficiary does not survive.
Pour-Over Wills and Remaining Assets
Even with a trust, a client still needs a will. The will written in conjunction with a revocable living trust is often far simpler and is typically called a “pour-over will,” as it directs solely owned assets to pour over into the trust upon death.
It’s common for some assets to remain in the decedent’s sole name, such as a small bank account or car, which may not be placed into the revocable trust. There is an added benefit to probate: only a will can direct the disposition of these remaining assets.
The Benefits of Probate
The probate process establishes a deadline by which creditor claims must be presented; after that time, the estate is no longer liable for those costs. This mechanism is extremely beneficial. For example, if someone passes after an extended illness, they may leave behind medical bills. Often, these bills are not delivered in a timely manner. If a hospital bill is not presented within six months of death, the estate does not have to pay it.
Why I Recommend Revocable Trusts
Today, I frequently urge the use of a revocable trust, especially for clients who own assets in their sole name. For my single, divorced, or widowed clients, I strongly encourage considering a revocable trust. For married clients, I present it as an option—though I especially recommend it if the clients are over 70, since it’s more likely that one spouse will outlive the other and end up with all assets in their sole name.
What has led me to lean more into recommending revocable trusts? There are two major factors. First, during the COVID pandemic, courts were closed and staff worked remotely, which caused probate matters to grind to a halt. I handled a probate case in New York City that took a year to open—a delay I’d never seen before. Previously, in Maryland, you could book an appointment with the Register of Wills and open an estate the same day. That’s no longer the case.
Second, government agencies are now often understaffed or overworked, leading to delays in the probate process that can negatively impact surviving family members’ finances.
A Lasting Gift: Planning for Loved Ones
Choosing a trust-based estate plan is a gift to your family or beneficiaries. We all should make sure to have a clear, comprehensive plan for managing our assets during life and after death. For most clients, a pour-over will and a revocable living trust are the perfect combination.
Evan J. Krame
