Your Will isn’t a “set it and forget it” document. Many people create a Will once, put it in a safe place, and assume their estate planning is finished. Years later, however, their family, finances, property, and desires may have changed significantly.
That can leave your family facing unnecessary complications at an already difficult time at one’s passing.
Comprehensive estate planning requires periodic review—not simply to determine whether your Will needs to be rewritten, but to make sure your estate plan continues to function properly. That includes your Will, beneficiary designations, ownership and titling of assets, powers of attorney, healthcare documents, and, when appropriate, implementing trusts.
Missouri law provides a variety of ways to structure an estate plan. The right approach can change as your circumstances change. A plan that was appropriate when your estate consisted primarily of a home, bank account, and retirement account may no longer be the best plan after acquiring additional real estate, investments, business interests, or substantial wealth.
A Will Does Not, By Itself, Avoid Probate
One of the most important misconceptions in estate planning is that having a Will means your estate will avoid probate.
It does not.
A Will is a document that directs how assets subject to the Will should be distributed at death and must pass through the probate process before they can be distributed to the beneficiaries.
Thus, a Will should not be confused with a probate-avoidance device.
Some assets can pass outside probate through beneficiary designations or ownership arrangements, including properly designated retirement accounts, life insurance policies, payable-on-death or transfer-on-death accounts, and certain jointly owned property. Consequently, someone with a relatively straightforward estate may be able to use a relatively simple plan consisting of a Will combined with properly completed beneficiary designations and asset ownership.
The key word is properly.
The Will becomes a necessity that assures your assets pass to the beneficiaries you have chosen when the beneficiary designations you created were NOT properly completed. Thus, a thorough estate plan will include a Will and properly completed beneficiary designations and asset ownership As a result, updating a Will without reviewing beneficiary designations and asset ownership can leave an estate plan only partially updated.
When a Simple Estate Plan Should No Longer Remain Simple
A Will combined with beneficiary designations can be an effective and straightforward estate plan when the estate is relatively uncomplicated.
But as wealth increases and the types of assets owned become more diverse, the “keep it simple” approach may need to change.
Consider an individual who initially owns:
- A primary residence;
- A checking and savings account;
- A retirement account; and
- A life insurance policy.
A Will, combined with properly coordinated beneficiary designations and ownership arrangements, may provide a practical solution.
Years later, that same person may own one or more of the following:
- Multiple homes or other real estate;
- Investment and brokerage accounts;
- Interests in one or more businesses;
- Rental properties;
- Significant retirement assets;
- Life insurance;
- Valuable personal property;
- Interests in partnerships or LLCs; and
- Substantial cash or investment assets.
At that point, simply updating the Will may not be enough.
The question becomes not only “Who gets my assets?” but also “How will those assets get to them?”
When a Revocable Trust May Make More Sense
As an estate becomes larger or more complicated, an attorney may recommend changing from a Will-centered plan to a revocable living trust and pour-over Will arrangement.
With a revocable trust, assets are transferred to the trust during the owner’s lifetime or a transfer on death designation to the trust upon the owner’s death depending on the nature of the asset. The owner retains control of the trust assets while living and can amend or revoke the trust anytime during the owner’s lifetime.
At death, assets properly held in the trust generally can be administered and distributed according to the trust’s terms without requiring those assets to pass through probate.
The accompanying pour-over Will remains an important safety net. It generally directs assets that were not otherwise transferred to the trust during the person’s lifetime to be transferred to the trust through the probate process.
The distinction is important: the trust can be the primary vehicle for administering assets, while the pour-over Will provides a backstop for assets that were inadvertently left outside the trust.
A revocable trust may also provide practical advantages during incapacity because a successor trustee can generally step in and manage trust assets without requiring a separate court proceeding to take control of those assets.
A trust is not necessarily appropriate for everyone, however. The decision should be based on the nature and value of the assets, family circumstances, privacy and probate considerations, incapacity planning, and the individual’s overall estate-planning objectives.
The More Assets You Have, the More Important Asset Titling Becomes
Estate planning is not just about documents. It is also about how assets are owned (read “titled.”
A beautifully drafted Will can fail to accomplish the intended result if assets are titled or beneficiary designations are inconsistent with the Will.
For example, a person may change a Will to leave a retirement account equally to three children but fail to change the retirement account’s beneficiary designation with the custodian of the account. The retirement account may then pass according to the existing beneficiary designation rather than the newly executed Will.
Similarly, real estate owned individually may be subject to probate even though other assets pass automatically to beneficiaries. Sometime – the use of beneficiary deeds is in order and keeping the real estate held individually to grant ease of sale and opportunity to appeal real estate tax assessments without need to hire an attorney.
This is why an estate-plan review should include an inventory of significant assets, and a review of how each asset is titled and how it is intended to pass at death.
Financial Changes That Demand an Estate-Plan Review
Significant Increase in Wealth
A substantial increase in wealth may be one of the most important reasons to reconsider an estate plan.
The plan that worked when an estate was relatively modest may not be appropriate after a business sale, inheritance, significant investment growth, or other accumulation of wealth.
Greater wealth may also create additional estate tax, asset-protection, charitable-giving, business-succession, and family-planning considerations.
More importantly, as wealth increases, estates frequently become more diverse, making asset ownership and administration more complicated.
Acquisition of Additional Real Estate
Buying additional real estate can change the estate-planning equation.
Multiple properties can create probate and administration issues, particularly when property is located in different states. Ownership through a properly structured trust or other entity may provide a more efficient method of administering those assets.
Business Ownership
Business interests require particular attention.
Starting a business, acquiring an interest in a company, bringing in partners, selling a business, or transferring ownership to family members can dramatically change an estate plan.
A Will alone generally should not be expected to address all of the issues associated with business succession.
The estate plan should be coordinated with operating agreements, buy-sell agreements, shareholder agreements, partnership agreements, and the ownership structure of the business.
Beneficiary Designations Should Be Reviewed Along With the Will
One of the most common estate-planning mistakes is updating a Will but failing to update beneficiary designations.
Beneficiary designations should be reviewed for:
- Retirement accounts;
- Life insurance policies;
- Payable-on-death accounts;
- Transfer-on-death accounts;
- Annuities; and
- Other assets that pass by beneficiary designation.
The primary and contingent beneficiaries should be checked. It is also important to consider whether naming an individual directly is appropriate or whether a trust should be the beneficiary under the circumstances. As a general rule – retirement plan beneficiary designations should be carefully reviewed to maintain favorable income tax treatment options.
The objective is to make sure the Will, trust, beneficiary designations, and ownership of assets all point toward the same overall estate-planning objectives.
The Five-Year Review Rule
Estate-planning attorneys commonly recommend reviewing an estate plan at least every five years. Even when nothing appears to have changed, laws, tax rules, family circumstances, assets, and financial objectives can change.
We often recommend reviews more frequently – such as every three years—or whenever a significant life or financial event occurs.
A review does not necessarily mean rewriting the entire estate plan. Sometimes the existing documents remain appropriate. In other cases, a new Will, updated beneficiary designations, changes in asset titling, or a completely different structure may be appropriate.
The important point is to review before assuming that an old plan still works.
Your Estate Plan Should Evolve With Your Estate
Estate planning is not a one-time event.
Early in life, a relatively simple plan may be entirely appropriate: a Will, powers of attorney, healthcare documents, and properly coordinated beneficiary designations may accomplish the family’s objectives.
As wealth increases and assets become more complicated, however, the estate plan may need to evolve. A revocable living trust with a pour-over Will, together with carefully coordinated beneficiary designations and asset ownership, may provide a better framework for managing and distributing a more complex estate.
The goal is not to create unnecessary complexity. The goal is to use no more complexity than your circumstances require—while recognizing that what is appropriate for a simple estate may not remain appropriate as the estate grows.
Your estate plan should reflect not only who you want to receive your assets, but also how, when, and through what structure those assets should be managed and transferred.
Rather than waiting for the next major life change, consider reviewing your entire estate plan—not just your Will. Your family will benefit from knowing that your documents, beneficiary designations, and asset ownership arrangements are working together to carry out your wishes.
A Side Note: Why Plan to Avoid the Probate of Assets
To Summarize – Because it can be time-consuming, expensive, open to the public, and probate delays the transfer of assets to heirs.
1. Time Delays – Probate can take months or even a year or more to complete, especially if there are disputes or complex assets. This delay can be problematic for heirs who need access to funds quickly, or for businesses that rely on the owner’s assets.
2. High Costs – Attorney fees, executor fees, court costs, and other administrative expenses can take a significant share of an estate’s value. In some states, these fees can be up to 5% of the estate’s worth, and for a typical estate, attorney fees alone can exceed $20,000.00. The cost of a full-blown estate plan is a fraction of attorney fees in most probated cases.
3. Public Record – Probate proceedings are public, meaning financial details, Wills, and family disputes become accessible to anyone. This lack of privacy can be a concern for some families.
4. Complexity and Stress – Even routine probate involves filing forms, meeting deadlines, and potentially court appearances. This can be stressful and burdensome for executors and families.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute legal advice. Always consult with a qualified attorney regarding your specific situation. Your particular facts and circumstances may alter conclusions derived from information contained in this article. The author assumes no liability for any errors resulting from reliance on this information and is not responsible for any damage resulting from the use of this information.