Ep. 24 - The Will - Least Important Document In An Estate Plan

Welcome to the Good Steward Law and Wealth Podcast, where host Ledly Jennings explores law and finance to help listeners become better stewards of their wealth. Each episode covers the latest trends and strategies in estate planning, elder law, investment, and wealth management. Tune in for the knowledge and tools for financial success and security.

Welcome back to the Good Steward Law and Wealth Podcast. Um, today we are going to talk about the least important document in an estate plan, and it's going to surprise a lot of people by what that document is, and it is the will. So maybe a controversial statement, but I want to talk about why the will is the least important and hopefully the least used document in your entire estate plan. And that kind of seems unusual because when people think of an estate plan, they think, oh, I need to get my will done, and that's really all they think about. But In actuality, my goal when I do an estate plan is to never use the will. If we are using a will in anyone's estate plan, that means we did something wrong. And what I mean by that is my goal with every plan we do is to avoid probate. And what a lot of people don't know is a will mandates probate. So a will has to go through probate. And like I said, my goal is to avoid probate. So we'll kind of talk about why a will is not important and we hope it's never used. But I will name a couple instances where we do need a will and it's valuable that we have it at the end. But generally, let's start with what is a will. So a will covers your assets. Basically, it says where your stuff goes when you pass away. And some of the key elements of a will is you have an executor, or some people call it a personal representative, and that is the person you name to manage your estate after you're gone, meaning it's their job to work with the court and gather all your assets and distribute it how you want. And the other element of that will is your beneficiaries. So you name who gets what, you name what they get, how they get it, when they get it. In a will, you say, I want my kids to get all my money and I want my friend to get my tractor. You know, you can get specific within a will and say all that. So those are the main elements of a will. But why I say it's bad is because a will has to go through probate. So what a will does is it tells the court where your stuff goes and how it gets there. And the keyword there is court. So the court-led process of administering a will is called probate. And why I think probate's bad is we do a lot of them in my office and we get paid to do them. Sometimes they pay really well, but I never enjoy it. You know, my clients that go through probate are usually not happy because they are in the process. Not only on top of that, but someone they love recently passed away. So it's never a fun process. Um, so it's my goal to avoid it because the main downsides of the probate process are it's time-consuming, so it takes at least 6 months, uh, usually a lot longer than that to get done. Um, it is public, so anything you do is in the public eye, meaning everything's filed with the court. That means everyone can look up what you own and who's getting it. So they know all your business. So everything is public. And if your family's fighting over something, that's in the public eye as well. The other thing is, is it costly? In Arkansas, the attorneys and personal representatives can charge a fee on a statutory rate, and it's anywhere from 1% to 5% or 6%. Generally, we say about 3% is the average. So if you think about, if you have $1 million going through probate,, then that $30,000 fee can be pretty hefty. So it can be very expensive. Um, and that's generally what probate is, but when you have a will, it has to be submitted to the court and approved to administer. So if you die with a will, it's called testate. If you die without a will, it's called intestate. The only difference in that is they both go to court, but, uh, intestate follows, uh, the statutory laws about who gets what. Testate follows your will. So your will says where things go. And kind of generally how the process works, I won't bore you all with probate, but you know, when someone passes away and comes to us with a will, we have to then gather death certificates, get an idea of all the assets, all the beneficiaries there are, and submit the will with a petition to the court. And the court looks at the will, looks at our petition, says, yes, this is a valid will, and they appoint the personal representative who then starts gathering the assets. From that point, we We have to notify every single heir. We have to send notices to everyone that this has been filed. You have to give them a time period to object to anything. And then you have to file a notice with the paper to say that someone passed away, we've started the probate process. And the purpose of this notice is to give creditors a chance to lay their claims. So if you passed away owing somebody money, then your creditors can state a claim with the court and to get their money back. Now, the time period starts as soon as you file that notice the paper and file it with the court, then a 6-month waiting period starts. So you're in the middle of a 6-month waiting period no matter what you do, because you have to give those creditors 6 months to file their claim. So that's why we say a probate at least lasts 6 months. At the best of probates, last 7, because you take that 6-month creditor period and you wait to see if there's any claims, and then you take a month drafting and filing the documents. But that is best case when there's maybe only one beneficiary, nobody's arguing, and we know where everything is., but most probates, you know, last more than a year. I would say most, but a lot of them do. We have one going right now that's well over a year. So probates are usually not a fun process. So when I start thinking about my clients, I say, how do we avoid probate? And that's why my goal is to never use the will, because if we're using a will, we're in the probate court. But you can avoid a probate by simply getting beneficiaries listed on your accounts. Or if you have a trust, listen to plenty of our other podcasts on the benefits of a trust and why it's the best tool. But if you have either of those or a joint owner on your property or accounts, any of those three things, then you avoid probate. So I always say at a bare minimum, you need to have beneficiaries listed on your accounts or you need to have a trust so your heirs are not stuck in the court system. And it's really that easy. So the only thing you're— if you applied for everything right, the only thing your will would control is your personal property. And as long as that personal property is under $100,000, which it usually is, then you don't have to go through a full probate in Arkansas. So that's why I say a will is the most useless document there is, because if you're using it, that means you didn't get a beneficiary listed on your account or you had a trust and it did not get funded properly. I'll give one recent example of how useless the will actually is. We had a client that had a IRA account, and it was with one of the big nationwide advisory firms. And on this account, well, in the client's will, they said, I want my IRA account at so-and-so advisor to go to my daughter. And they did this because they specifically did not want it to go to the two other kids. They wanted it to go to the daughter, but they did not list a beneficiary on that IRA. So because they thought their will would take care of that. They knew and understood that it would have to go through probate, but they thought that their will would take care of it. They didn't want to list a beneficiary on the account for whatever reason. But that's how useless a will is because that large financial advisor has an internal policy that says if you do not have a beneficiary listed on your account, the IRA goes to the heirs at law regardless of whether there's a will or not. So we opened the probate, filed the will with the court, took care of everything, but because they had a specific separate contract with this IRA, that means the people he wanted to specifically disinherit got a share of the IRA, all because he didn't list a beneficiary and we were relying on a will. So beneficiary designations, private contracts, trusts, joint ownership, all that overrides a will. And that's why a will is almost, you know, all but useless, because I don't want to ever be using one. Now, I did mention that There's a couple instances where a will is valuable, and I will say the main one is for guardianships. So if you are a parent with young kids, you need a will to name a guardian for your kids. And that is one of the most important things you can do. So everyone with young kids needs a will because you need to name a guardian. And why that's done is you, you name a guardian in your will. And the judge wants to be sure. And, you know, our state and our public policy laws want to be sure that whoever's named as guardian is capable of raising a minor child. So that's why it has to go through the probate process. You submit that will to the guardianship court, which is also the probate court, and they say, yes, this person they named is, you know, good. They're not on drugs or not alcoholics. You know, they're not— they don't have some kind of problem. They are okay to raise your kids and they approve that process. So that is where you name your guardian. For your kids after you're gone. Now, side note, we also name our guardian and our power of attorney because a will comes into play when you pass away, but a power of attorney names the guardian of who could be your kids, you know, just if you're incapacitated or maybe out of the country. You know, your power of attorney controls while you're living. So really, you name a guardian in two places, but that is one reason a will is important. Now, the other reason is a little more obscure, but we always do a will for clients, even if they have a trust with us. Even if they don't, we help set up clients' beneficiary designations, you know, deeds on their property to avoid probate. But, and if they have a trust, we put all their assets in a trust and the trust takes the place of a will, but we still do a will for certain reasons. And that type of will is called a pour-over will. So what this will does is it says if If you die with anything in your name, pour it over into my trust. So I think of it like an airbag, that it's a document that we have and we're glad it's there, but we hope we never have to use it because we hope we're never in that car wreck. But this applies to things that, if you had a trust, things that didn't get into it, maybe through some fault of your own, maybe you forgot about an asset, maybe there was an investment account over there from an old job that you forgot about. Then the pour-over will says, put that in my trust. A couple of unique examples recently we've seen is Jimmy Buffett passed away in Florida and he filed or his estate filed a pour-over will with the state of Florida. And that's how we even know that he had an estate plan. And what his pour-over will said is, my trustee is this and put everything I own in my trust. So even with that pour-over will, we still don't know what he owned. Or who it went to. We just know he had a trust and everything went in there. But what that told me is they left something out of the trust, maybe accidentally, or they were just doing it as a precautionary measure for any future royalties or money that he may come into. They filed this will with the court to make sure everything he has goes to his trust and the beneficiaries he names. One other unique example is You know, say you are in an accident with a, you know, a car accident with a big rig, and your estate wins a lawsuit for that accidental death with the big rig. That's money you don't know about while you're living. So how can you possibly put it in your trust or make sure it has a beneficiary? That's where a pour-over will comes into play, because if your estate comes into a lot of money after you're gone, it says where that money will go. So the two instances where a will is actually good is guardianships and a pour-over will. Now the rest it. Hopefully we never use a will, and hopefully it is a document that sits in the back of your estate planning binder and collects dust, because that is a good estate plan, one that never actually has to use the will. And thank you for listening to this episode of the Good Steward Law and Wealth Podcast, where we consider everything's a gift and it's our job to manage those gifts to the best of our ability.

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