Estate Planning Self Examination Checkup Chapter III: Reviewing the Dispositive Portions of the Will
- On May 24, 2016
- Robert Muñoz, Tax and Estate Planning
In the last installment, we covered issues concerning when wills should be revised and the differences between treatment of probate and non-probate assets. In this installment, we will begin by defining the persons in the will and then move on to a basic review of certain areas of the will.
Let’s begin by defining the roles played by people in the will. In a will, the “testator” is the person making the will. The “beneficiary” is the one who will inherit all or a portion of the estate. The other players within the will are the “executor” or “administrator,” the “trustee” and the “guardian.” The executor or administrator gathers the assets, pays the bills and taxes and distributes the assets to the beneficiary or trustee. The trustee holds the assets for a beneficiary whose gift is subject to a trust. The guardian is the person or persons designated to raise and protect children under the age of 18. The testator must be sure the people designated are generally competent to perform the duties of the position. The details of these positions will be discuss further in a later installment.
Generally, the bulk of most estate plans are contained in the last will and testament. A will is a legal expression or declaration of an individual’s wishes as to the disposition of their property after death. Any will can be changed or revoked during an individual’s lifetime, provided the person has the legal mental capacity to make such a decision. The will itself is not operative until the death of the testator.
In New Jersey, an estate cannot proceed to probate until ten (10) days after the death. Thus, you cannot probate the will while your uncle in in hospice because you might find it inconvenient to wait. The will is probated in the county where the deceased lived at the time of their death.
Dying without a will is known as dying “intestate.” Dying intestate can be costly to heirs and leave how your property will be distributed to the manner provided by state statute. As with most things that come out of Trenton, the state statute may not reflect your personal preferences. The statute may also apply when the will is incomplete, because it has failed to completely dispose of the estate due to a contingency the testator failed to cover.
A classic example of the problems of intestacy where the will fails to provide for all contingencies is the story of the man and his two brothers. The decedent had one brother he did not get along with and wanted to be sure he received nothing from his estate. He specifically provided in his will that his “good” brother should receive all of his estate while specifically excluding his “bad” brother from his estate completely. Unfortunately, the will made no provision in the event the good brother predeceased him. In this story, the testator died after his good brother had passed away. Since there was no other provision in the will, the testator was considered to have died intestate. Since he died intestate, under the laws of his state, the bad brother was the only heir to his fortune. Thus, the surviving bad brother received all of the testator’s estate, even though that was clearly not the testator’s intention.
The moral of this tale is it is important that one should not only have a will, but the ultimate beneficiaries of the will must be identified as a class of persons to avoid the potential anomalies of the intestacy laws. To properly control how an estate will be distributed the will be comprehensive.
Most wills begin with the testator declaring the document to be their last will and testament. The declaration establishing the last will and testament also revokes any and all other wills. Though viewed as boilerplate, this is an extremely important part of the will, particularly if a prior will existed. The will then authorizes the executor, who will be discussed below, to act and pay all of the just debts and the debts of the last illness prior to death.
After the opening paragraphs, the will often turns to specific or general requests. Specific requests are made by providing to whom particular items or sums are to be given under the will or through reference to another document in the case of tangible personal property. The New Jersey Probate Law permits the use of a separate writing or memorandum to dispose of tangible personal property. The list of tangible personal property must be drafted and executed as probate law requires. It should be noted that tangible personal property does not include money, evidence of a debt, documents of title, stocks, bonds, securities or property used in a trade or business or other tangible properties specifically disposed of in the will. Items of tangible personal property that may be disposed of through this mechanism include but are not limited to jewelry, silverware, antiques, a stamp collection, china, glassware, furniture, furnishings and other personal property, including automobiles.
In addition to specific bequests of personal property by a separate writing, there may be specific bequest to an individual or a charity. The bequest can be real property, money or any other type of asset. The amount or interest can be expressed in a specific dollar amount or by percentage. Specific bequests are satisfied before any general and residuary bequests.
In contrast, a general bequest is a gift which may be satisfied out of the general assets of an estate. It could be based upon a value, or proportion or all of the estate. It could also be a generally described gift.
Coming next: Estate taxes and exemptions, unlimited marital deductions, disclaimer and bypass trusts and other important will provisions.
Author: Robert F. Munoz