When a client asks for your advice on creating or reviewing their estate plan, how do you proceed? Even though you as an advisor may not be the primary estate planning team member, you are in a unique position to add value. For instance, by learning to identify discrepancies in an estate's dispositive provisions, the advisor can work with the client's attorney to help foster a more team-oriented, coordinated effort which will help assure the wishes of the client are adequately met.
In our first article on this topic, we looked at what you need to know about wills: the checklist. In this article, the second in a series on how to review a client's will, we'll continue our analysis of the clauses contained in a will.
Overview
A will is divided into multiple clauses or sections. Each clause conveys the testator's wishes in a particular area. I have identified 12 clauses. This number will vary based on applicable state law and attorney preference. Our goal is to identify issues in the will which could thwart the testator's wishes.
Problems can arise for many reasons.For example, if the attorney doesn't have a complete picture or if he is practicing outside his area of expertise, the estate plan could fail.
At times, a client will hire an attorney who is also a friend, hoping to save a few dollars. However, if the attorney is unfamiliar with estate and tax law, the document may not accomplish what the client intends. Unfortunately, the client may not realize it.
If errors are eliminated and the document is unambiguous, the survivors should experience a smooth and less stressful transition. This is especially important since the death of a loved one is one of the most stressful events any of us will ever face.
There is an excellent opportunity for any advisor who decides to enhance his estate planning expertise. It's important that the attorney views the advisor as an ally and not an adversary. In short, if the advisor discovers an error, it must be handled with care so the attorney will not feel threatened.
The clauses of a will
Even though this list is in the first article in this series, I have included it here for convenience. Here are the 12 clauses typically found in a will:
1) Introductory
2) Debts
3) Tax
4) Tangible Personal Property
5) Real Estate
6) Specific Bequests of Intangibles and Cash
7) Residuary
8) Powers
9) Appointment of Fiduciaries
10) Testators Signing
11) Attestation
12) Other Clauses and Provisions
Now let's resume our deeper dive into each of these clauses by focusing on clauses five through eight.
5) The real estate clause
Issues to check in the Real Estate clause:
Does the testator own any real estate?
How is the property titled?
Is the real estate located in a state other than the testator's state of domicile?
Based on the location and titling of the real estate it may or may not be subject to the probate process. If the real estate is subject to probate and located in a state other than the testator's state of domicile, it will be subject to ancillary probate. This will require the services of an attorney licensed in the state where the property is situated. Ancillary probate will also increase the cost and extend the time it takes to settle the estate.
To avoid probate, the real estate could be titled jointly with a right of survivorship (state law permitting) or placed in a trust. Some states also allow a transfer on death (TOD) title. However, you should check with a qualified professional familiar with the laws of the state in question.
6) Specific bequests clause
Issues to check in the Specific Bequests clause:
Are there any specific bequests?
Has each item and recipient been clearly identified?
