Under the Hood: What You Need to Know About Wills, Pt. 2: Real Estate, Bequests

Are there any specific bequests?

Has each item and recipient been clearly identified?

Is there a specific bequest of publicly traded stock?

If so, has replacement property been identified in the event the stock is sold prior to death? 

It's important to assure that the asset is adequately described and the recipient is clearly identified. If there is a possibility that the property could be sold, stolen or otherwise disposed of prior to death, replacement property should be listed. 

7) Residuary Clause

Issues to check in the Residuary clause:

Is there a clause to transfer the residue of the probate estate to a trust?

Are there any items the testator would not want to be governed by a trust?

Is there pour over language in the will?

If there is pour over language, has a valid inter vivos trust (i.e. living trust) been established?

Are any residuary beneficiaries a minor or an incompetent? 

Here's a 'pour over' example: A person creates an inter vivos (i.e. living) trust which may or may not be funded. In the will, pour over language is included which directs the executor to move assets into the trust at death, thus escaping probate. To be effective, the trust must be executed at the same time or prior to the creation of the will. 

8) Powers Clause

Issues to check in the Powers clause:

Does the will contain "independent executor" language?

Independent executor language permits an executor to operate independent of the supervision of the Probate Court which allows the probate process to move more quickly. This is only applicable if permitted by state law and expressly stated in the will.

Is the liability of the executors or trustees limited by the will?

Are there any limits on their powers (i.e. cannot make certain investments)?

If there is a marital trust, does the power adversely affect the marital deduction?

Example: If the will contains specific language which authorizes the surviving spouse to demand that non-income producing property be sold and replaced with income producing property, what if the non-income producing property is shares of a closely held business? Would the sale cause a loss of family control?

If there is a business, can the executor continue operating it?

Is the executor qualified to run the business?

Is a bank or other institution named as executor or co-executor?

If co-executor, how will final decisions be made? Will each executor have equal authority?

If a bank is named, is the bank allowed to invest in its own stock without a conflict of interest? Is there a limit on the amount? 

Conclusion

The process of estate planning can be complex. A will is only one tool but it needs to be coordinated with all estate dispositive provisions to assure that those who inherit receive the correct asset in the intended proportion.

When death occurs, it brings with it a bevy of emotional turmoil at a time when important financial decisions must be made. Therefore, to the extent we can address these decisions prior to death, the entire process will run more smoothly, resulting in less stress and greater peace of mind for those involved.  

In my next article in this series on how to review a client's will, we'll conclude by discussing clauses nine through twelve. This includes the Fiduciaries Clause which is one of the more important sections in the will. 

Until then, thanks for reading and have a great day!