Simple Wills and Advance Directives
Our firm receives frequent inquires related to the preparation of “simple wills.” Simple wills are sometimes sufficient instruments for clients to direct the disposition of their probate property. However, other clients may need more complex planning tools. This article discusses circumstances for which a simple will may be appropriate, then goes on to review other end-of-life planning documents we recommend clients consider when asking us to draft a will on their behalf.
Wills direct how a decedent’s probate assets are distributed at the decedent’s death. When someone dies, their property passes to others in one of three ways: by operation of law, by contract, or through probate. Property that is transferred by operation of law passes to someone else automatically at the death of decedent because the transfer is provided for by statute. For instance, property owned in joint tenancy automatically passes legal title to the surviving tenant when a joint tenant dies. Property transferred by contract refers to property which is passed to a decedent’s beneficiaries because the decedent contracted with another party to have the property pass at the decedent’s death. Beneficiary designations in life insurance policies or retirement accounts are examples of ways property passes by contract.
Property that cannot pass by operation of law or by contract upon a decedent’s death must be administered through a probate proceeding. Probate is the process of formally distributing a decedent’s assets that do not pass by operation of law or by contract. A will allows a decedent to direct how their probate property is distributed. Although there are many different types of wills, “simple wills” are generally appropriate where: 1) a decedent’s estate is below the federal estate tax exemption level; 2) there is no need to create trusts; and 3) there are not other relatively complicated issues which require more detailed planning.
1. No Federal Estate Tax. The federal estate tax exemption level is $11.7 million per person in 2021. All property held by the decedent at the decedent’s death is considered for federal estate tax purposes, including non-probate assets such as property held in joint tenancy, life insurance death benefits, and retirement accounts. If an unmarried individual or married couple’s cumulative assets are below the federal estate tax exemption level, a simple will may be appropriate.
2. No Need For A Trust. A trust may be appropriate where, for instance, an individual has minor children or other beneficiaries to whom they do not want to leave property outright, the individual holds out-of-state property, or the individual desires privacy in the administration of their estate. If none of these conditions apply, a simple will may be appropriate.
3. No Other Complicated Planning Issues. Certain relatively common circumstances may create the need for a planning instrument other than a simple will. For example, if an individual owns an interest in a small business, is married and has children from a previous marriage, wants to disinherit a spouse, fears a post-death challenge to the will, or wants to leave money to their grandchildren but not to their children, an instrument other than a simple will may be appropriate.
Since the disposition of assets does not seem overly complicated in circumstances which call for a simple will, people may believe that a do-it-yourself kit or program may be a more efficient way to draft such an instrument rather than working with an attorney. While using a software package or internet site to draft a will may initially be less expensive than working with an attorney, what we often see on the administration side of our practice is that do-it-yourself kits end up being much more expensive in the long run.
Many of these programs or sites provide “one size fits all” solutions, which cannot adequately address the nuances of every individual’s plan of disposition. First, every state has different probate laws, so it is impossible for a single solution to work effectively when courts in different states may interpret the document differently. Second, many of these programs inhibit the user’s ability to customize their plan of disposition beyond certain minimal default possibilities. Finally, people who use these sites or programs often unintentionally end up creating documents that do not work as intended simply because the user is not well-versed in the nuances of probate laws. The ultimate result is that saving a few hundred dollars up front can end up costing thousands more when the estate is administered and ambiguities or events that were not contemplated have to be sorted out by courts and attorneys.
When someone asks us to prepare a will for them, we also recommend the preparation of other important advance directives, which clients may not have otherwise considered:
1. General Durable Power of Attorney. A general durable power of attorney appoints an agent to make decisions related to the client’s finances or property. The general durable power of attorney can be made effective immediately (standing) or upon proof of the client’s incapacity (springing).
2. Medical Power of Attorney. A medical power of attorney appoints an agent to act on the client’s behalf with respect to medical decisions when the client is unable to make the decisions on their own.
3. Living Will. A living will gives specific direction to health care providers in the event that an individual is unable to communicate these directions because of a terminal illness or loss of consciousness.
4. HIPAA Releases. The Health Insurance Portability and Accountability Act (“HIPAA”) protects the privacy of health care information. These releases allow an individual’s appointed agent under a power of attorney to obtain important healthcare documents from medical service providers if necessary to act on the individual’s behalf.
When someone contacts our firm asking only for a “simple will,” they may not be aware of the criteria that make a simple will the appropriate instrument to direct the disposition of their probate assets. Likewise, the individual may not be aware of the related ancillary documents that should be considered during end-of-life planning. Our firm provides customized estate planning solutions based on every client’s unique circumstances. Contact us for more information about designing an estate plan that is tailored to your specific goals and needs.