What a Will Does
A will provides for the distribution of your property at the time of your death in any manner you choose (subject to some laws that prevent disinheriting a spouse or some children). Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain joint property, life insurance, retirement plans and employee death benefits) unless they are payable to your estate.
Wills can be of various degrees of complexity and can be utilized to achieve a wide range of objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will establishes one or more trusts, it is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created in your lifetime), in which case it is called a pour over will. In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management and creditor protection for the surviving family members, to provide for charities, and to minimize taxes.
Aside from providing for the intended disposition of your property to spouse, children etc., there are a number of other important objectives that may be accomplished in your will.
- You may designate a guardian for your minor child or children if you have survived the other parent-and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child’s estate
- You may designate a personal representative of your estate in your will and eliminate the need for a bond.
- You may choose to acknowledge or otherwise provide for a child (e.g., stepchild, godchild, etc.) in whom you have an interest, an elderly parent, or other individuals.
- If you are acting as custodian for the assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.
Good planning can also help your support of religious, educational, and other charitable causes.
What A Will Does Not Do
A will does not govern the transfer of certain types of assets, called nonprobate property, which by operation of law or contract pass to someone else on your death.
How to Execute a Will
Wills are signed in the presence of two witnesses and certain formalities must be observed. A later amendment to a will is called acodicil and must be signed with the same formalities. In Florida, the will may refer to a memorandum disposing of tangible personal property, such as furniture, jewelry, automobiles, etc., which may be changed from time to time without the formalities of a will. A will that is formally executed with the signatures notarized with certain specified language is deemed in Florida to be self-proved and may be admitted to probate without testimony of witnesses or other additional proof.
Types of Non-probate Property:
Jointly Owned Property
If you own property with another person as joint tenants with right of survivorship, that is, not as tenants in common, the property will pass directly to the remaining joint tenant upon your death and will not be a part of your probate estate. (It will, however, be a part of your taxable estate.) Frequently, people (particularly in old age) will cause bank accounts or securities to be placed in the name of the owner with one or more children or trusted friends as joint tenants with right of survivorship. This is sometimes done as a matter of convenience to give the joint tenant continuing access to accounts to pay bills. However the survivor of the two will own the entire account, regardless of the intent of the persons.
It is important to realize that the ownership of property in this fashion often leads to unexpected or unwanted results. Disputes, including litigation, are common between the estate of the original owner and the surviving joint tenant as to whether the survivor’s name was added as a matter of convenience and/or management or whether a gift was intended. The planning built into a well-drawn will may be partially or completely thwarted by an inadvertently created joint tenancy that passes property to a beneficiary by operation of law, rather than under the terms of the will.
Many of these problems are also applicable to institutional revocable trusts and “pay on death” forms of ownership of bank, broker, and mutual fund accounts and savings bonds. You need to talk with a lawyer to achieve effective planning and have knowledge of the consequences of each property interest and technique.
The term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person may be both a trustee and a beneficiary of the same trust. A trust created by your will is called a testamentary trust and the trust provisions are contained in your will.
If you create a trust during your lifetime, you are described as the trust’s grantor or settlor, the trust is called a living or inter vivostrust, and the trust provisions are contained in the trust agreement or declaration. The provisions of that trust document will usually determine what happens to the property in the trust upon your death.
A living trust may be revocable and subject to change or terminated by the settlor or be irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust.
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age of adulthood. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust assets among the children when they reach a specified age.
Annuities and Retirement Benefits
You may be entitled to receive some type of retirement benefit under an employee benefit plan offered by your employer or have an Individual Retirement Account (IRA). Typically, a deferred compensation or retirement benefit plan will provide for the payment of certain benefits to beneficiaries designated by the employee in the event of the employee’s death before retirement age. After retirement, the employee may elect a benefit option that will continue payments after his or her death to one or more of the designated beneficiaries. Certain spousal annuities are mandated by law and may be waived only with the spouse’s properly witnessed signed consent. The various payment options will be treated differently for tax purposes. Any person entitled to retirement benefits should seek competent advice as to the payment options available under his or her retirement plan and the tax consequences of each.
If you own life insurance on your own life, you may either
(a) designate one or more beneficiaries to receive the insurance proceeds upon your death, or
(b) make the proceeds payable to your estate or to a trust created by you during your lifetime or by your will.
If the insurance proceeds are payable to your estate, they will be distributed as part of the general estate in accordance with the terms of your will or, if you die without a will, the distribution will be according to the applicable laws of intestate succession. If the proceeds are payable to a trust, they will be held and distributed in the same manner as other trust assets and may also be free of creditors’ claims.
Any insurance proceeds that are payable directly to a minor child will generally necessitate the court appointment of a legal guardian or conservator. This can be avoided by having a trust designated as beneficiary or a custodial account.
Insurance plays an important role in estate planning and should be coordinated with all other aspects of your estate plan. The laws pertaining to the taxability of insurance proceeds are complex, however, so it is important that all matters pertaining to life insurance be carefully reviewed with your attorney and insurance adviser.
Please call us at 850-386-5777 with any questions you have about Wills, Probate or Estates.