Tale of Two Wills
September 29, 2014
By: Barry E. Haimo, Esq.
By now you should know that your beneficiaries and fiduciaries are chosen for you by law in probate if you fail to decide in the appropriate document. One of those documents is a last will and testament, and there are a few types.
The two most common are the stand-alone last will and testament and the pour-over last will and testament.
Like its name suggests, the stand-alone last will and testament becomes effective in probate court after you pass away. It appoints your personal representative (“executor” in other states) and addresses guardianship of minor children, and post-humous issues, like burial, cremation, headstones, funeral and other services. The PR must hire an attorney, at least in Florida, in order to administer the estate. The PR is responsible for the ABCs: identifying assets, beneficiaries and creditors. It’s usually a long process, and each step requires judicial oversight.
The beneficiaries are usually determined by way of a “pre-residuary” or “residuary” devise. This is sometimes known as “specific bequests” and “residual bequests”. There are a lot of rules governing this area of law so it’s important to draft your documents correctly. For example, what happens to the devise of your cherished Rolex if you don’t have it anymore upon your death? Should a similar value be inherited or should the gift lapse? Nevertheless, ultimately, the beneficiaries inherit the balance of the estate after creditors are paid.
One way a beneficiary can inherit is via a revocable or irrevocable trust. Trusts are incredibly versatile tools that I often introduce to clients. When a last will and testament directs the personal representative to create and fund a new trust for a beneficiary, it’s called a testamentary trust. This is a common vehicle for ensuring one’s affairs descend properly. It’s important to understand that the transition occurs only after death. Hopefully your will is drafted properly, because an invalid will is like having no will at all. More importantly, as it relates to testamentary trusts, the statute makes all bequests outright, which may be very different result than anticipated. On the other hand, pour-over wills, as their name suggests, are shorter wills.
Like the stand-alone will, they appoint fiduciaries and address guardianship of minor children, post-humous issues., like burial, cremation, headstones, funeral and other services. Pour-over wills also usually contain pre-residuary devises. Where they differ is the residuary beneficiary. This is usually one or more trusts. Generally with pour-over trusts, the trust is created and funded during life. The assets that are put in trust are generally those last remaining assets that weren’t removed from one’s estate prior to death. They are placed in trust for the designated beneficiary and administered pursuant to its precise instructions. If planned properly, a pour-over will in combination with a revocable (living) trust will avoid guardianship and probate all together.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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