As an important note, we are not estate attorneys; you should consult with an estate attorney when making final decisions about how to craft your Estate Plan. This article is intended for high-level educational purposes. Individual facts and circumstances could vary or could involve important nuances for your consideration.

Our first blog in our series on Trusts, The Role of Trusts in Financial Planning, laid the foundation for the types of Trusts that are available to you. In this next entry, we turn to questions that many individuals and families ask when preparing their estate for transfer to their heirs: “I don’t need a trust, do I? Won’t my Will take care of everything?”

For a majority of Americans, a Will is likely sufficient to accomplish their simple wealth transfer needs and desires. For some, though, additional care should be given to ensure any more complex wealth transfer stipulations can be addressed.

We will first focus attention on what a Will is, and what it can accomplish. We will then turn our attention to situations in which a Will may fall short and may require the use of a Trust.

What is a Will?

What we commonly call a Will is the estate planning document called a Last Will and Testament. This is a legally binding document which gives expression to an individual’s final wishes regarding the transfer of their properties and belongings to their heirs or other organizations. Most are aware of this.

The most common estate disbursements will involve splitting the interests of each asset equally among heirs. For example, one might have their savings account split equally between their two children. Others may direct an uneven split of assets, such as 50% to their biological child, and 25% to each of their two stepchildren. Others may direct a gift of 50% to charity, and remaining 50% to their only child.

Special bequests may be included in which personal belongings will be named directly and distributed to specific individuals or organizations. As an example, one might bequeath a diamond ring to a named daughter.

A Will may also be used to specifically disinherit an individual that the courts may otherwise deem as a legitimate heir.

The Will generally names an Executor to administer the written desires and intentions of the deceased to settle all debts and retitle all assets as named. Where minor children may be impacted at the time of the execution of a Will, a legal Guardian may be named for those minor children.

In settling that individual’s estate following their passing away, the presiding Probate Court will oversee the orderly process of listing all relevant assets, and verify that the Executor has carried out the retitling and disposition of all assets as per the wishes in the executed Will. A simple estate settlement involving a house, a couple of accounts, and personal belongings can be relatively easy to settle and close out in the probate process. More complex estates could require higher burdens of time and costs (court fees, attorney’s fees, etc.).

Many individuals are not aware that a Will does not affect any accounts or titles for which you’ve named a beneficiary or beneficiaries. Examples of assets for which you typically name beneficiaries directly would include:

• Qualified Plan balances (401(k)s, etc.)
• IRAs/Roth IRAs
• Life Insurance death beneficiaries
• Investment, Bank, or Real Assets titled with a Transfer on Death (TOD) or a Payable on Death (POD) registration.

In each of the above cases, your named beneficiaries would pass outside of the probate process, and therefore, would not be directed by the Will. In designing an Estate Plan, it is critical to look at ALL aspects of wealth transfer to ensure your actual wishes are heeded, including your Will, your beneficiary designations, as well as your Trust, if you’ve created and funded one. Some make the mistake of creating detailed disbursement instructions within a Will, but then fail to name beneficiaries in a similar fashion — which could leave one's actual wishes unfulfilled.

Shortcomings of a Will that a Trust May Resolve

As noted earlier, a majority of individuals and families can often accomplish their desires for wealth transfer at death through a Will (along with corresponding beneficiary designations). However, there are several desires whose complexities could require more than a simple Will to carry out. Here are examples where a Trust may be required:

• A desire to limit or control in any way an heir’s access to their inheritance (by time, age, use, and/or amount). A trust could be used in these cases to address:
  • The care for and education of students;
  • The measured access to funds by heirs with spendthrift tendencies; or
  • The creation of positive motivation for heirs to accomplish life achievements.
• A desire to reduce the impacts of the Estate Tax on the wealth transfer and/or the lifestyle of surviving family members.
• A desire to protect assets now from an heir's spouse who may spend down the inheritance frivolously.
• A desire to irrevocably protect assets against a Medicaid spend down in the event long-term care could otherwise require such.
• A desire to irrevocably care for a family member with special needs over and above the minimal care they may receive through Disability benefits, Medicaid, or Medicare programs.
• A desire to keep wealth transfer details private (because the probate process is public).
• A desire to protect an heir's inheritance when they work in a highly litigious field, such as medicine.

Navigating the Complex to Arrive at a Simple Solution
The McKinley Carter team is well-versed and ready to help you navigate from your wishes and desires to successful outcomes. As it pertains to your end-of-life wealth transfer needs, you might be able to accomplish success with a simple Will and proper beneficiary designations. Perhaps your situation is more complex and requires more advanced Estate Planning involving a Trust or multiple Trusts. For any scenario, we will guide you through those conversations to help you arrive at a simple solution and an actionable plan before you go on the clock with your Estate Planning attorney.