Is My Will Enough?

This isn’t a post about willpower and accomplishing one’s goals. It’s about the essential estate planning document known as a will. Everyone should have these three key estate planning documents:

  1. Durable Power of Attorney.
  2. Healthcare Power of Attorney.
  3. A will.

Although each of these documents is important, this post will focus on the question, “is my will enough?”

According to the National Association of Estate Planners & Councils (NAEPC), more than 120 million Americans don’t have up-to-date estate plans, and according to a recent Forbes study, only 35 percent of Americans even have a will. So if you have a will in place, at least you’re on the right path.

When a person dies, their assets move in one of three ways: by title, by beneficiary designation, or by will. A will designates the transfer of all assets except those controlled by an account title or beneficiary designation. Below are examples of how account title and beneficiary designation come into play.

Account Title vs. the Will

Let’s assume you have a checking account in your name alone and your will states you want to leave all of your assets to your children. After you die, your executor will distribute your checking account to your children. Now let’s assume you own the checking account jointly with your wife. Your will hasn’t changed and it still leaves all of your assets to your children. What happens to the checking account upon your death? Because the checking account title has your wife’s name on it, she would receive the entire balance remaining in the checking account, meaning your children would receive nothing.  This is an example of account title trumping the will.

Beneficiary Designations vs. the Will

You may have noticed that when you open an IRA account, a 401(k) account, or purchase a life insurance policy you need to designate a beneficiary (or beneficiaries) who will ultimately inherit your assets. These beneficiary designations bypass your will. No matter what your will says, the beneficiary designation determines the path of the assets. This is an example of account title trumping the will.

Update your will regularly

  • If you update your will, be sure to update your policy beneficiary designations. This applies to your life insurance policies, retirement plans, and payable-on-death accounts. That’s because these go to the designated beneficiaries listed in the contract rather than in your will.
  • Designate a qualified executor for your estate. Your spouse or your eldest child is appropriate for a small estate, but the more complex the proceedings, the more important it is for you to have a CPA, estate planner or other fiduciary financial advisors to ensure that paperwork and processes are followed properly, and that the estate is distributed impartially.

National Estate Planning Awareness Week (3rd week of October)

According to Valentino Sabuco, CFP®, AEP®, founder of The Financial Awareness Foundation (TFAF), 50 percent of American adults (120 million people) do not have up-to-date estate plans and tens of millions of U.S. adults are almost out of money by age 70 even though their life expectancy is well into their 80s. “This can lead to a significant and unnecessary shrinkage of family assets and an enormous waste of time and resources at the most inopportune time. Financial and estate planning is important for everyone, not just the wealthy,” observed Sabuco.

In response, the founders of, TFAF,  led by Sabuco, approached California Congressman’s Mike Thompson office in 2007 with the idea of creating a National Estate Planning Awareness Week Congressional proclamation. After 18 months of research and work, Congressman Thompson and 49 bipartisan congressmen and congresswomen co-authored and passed H.Res. 1499; proclaiming the third week in October as National Estate Planning Awareness Week. The full text of the proclamation can be found here.

If you suspect a close friend or family member needs help with their estate planning, please don’t hesitate to contact us (610.695.8070). We’d be happy to help.

 

Adviser is not licensed to provide and does not provide legal or accounting advice to clients.  Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.

About Mark Rioboli

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 25 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK

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