What is not Covered by a Will?
A last will and testament is one part of a holistic estate plan used to direct the distribution of property after a person has died. A recent article titled “What you can’t do with a will” from Ponte Vedra Recorder explains how wills work, and the types of property not distributed through a will.
Wills are used to inform the probate court regarding your choice of guardians for any minor children and the executor of your estate. Without a will, both of those decisions will be made by the court. It’s better to make those decisions yourself and to make them legally binding with a will.
Lacking a will, an estate will be distributed according to the laws of the state, which creates extra expenses and sometimes, leads to life-long fights between family members.
Property distributed through a will necessarily must be processed through a probate, a formal process involving a court. However, some assets do not pass through probate. Here’s how non-probate assets are covered or distributed:
Property in Trust. Assets owned by a trust pass to the beneficiaries under the terms of the trust, with the guidance of the trustee.
Life Insurance. Proceeds from life insurance policies are distributed directly to the named beneficiaries. Whatever a will says about life insurance proceeds does not matter—the beneficiary designation is what controls this distribution, unless there is no beneficiary designated.
Retirement Accounts. IRAs, 401(k) and similar assets pass to named beneficiaries. In most cases, under federal law, the surviving spouse is the automatic beneficiary of a 401(k), although there are always exceptions. The owner of an IRA may name a preferred beneficiary.
Keep in mind that under current Louisiana law, Payable on Death Accounts (POD Accounts), although presented by many banks as being not subject to probate, are actually subject to the jurisdiction of the court. This blog article explains the danger of using POD accounts, which can in certain circumstances be great, but in others they can lead to litigation.
Here are some things that usually should NOT be covered in your will:
Funeral instructions might not be read until days or even weeks after death. Create a separate letter of instructions and make sure family members know where it is.
Sometimes provisions for a special needs family member need to be made separately from a will. A special needs trust can be part of your will or not, and is used to ensure that the family member can inherit assets but does not become ineligible for government benefits. Talk to an elder law estate planning attorney about how this is best handled.
Conditions on gifts should not be addressed in a will. Certain conditions are not permitted by law. If you want to control how and when assets are distributed, you want to create a trust. The trust can set conditions, like reaching a certain age or being fully employed, etc., for a trustee to release funds.
Reference: Ponte Vedra Recorder (April 15, 2021) “What you can’t do with a will”