One of the major reasons clients prepare estate plans is to avoid probate. There are many different ways to avoid probate. You could title assets to a trust, own assets jointly with another, or use beneficiary designations, beneficiary deeds, transfer on death accounts or payable on death accounts to name a few. Each of these tools keeps assets outside of probate. And, in Arizona, if you die with an estate less than the small estate affidavit limit, your estate may avoid probate.
A will on it’s own does not avoid probate. So, for many clients, this begs the question- if I won’t have a probatable estate, do I still need a will? The answer is most likely, yes. Here’s why.
An Asset Gets Left Out of the Trust
Mistakes happen. Sometimes, even the most careful of planners forget to plan for an asset. Let’s say that your estate plan utilizes a trust to avoid probate. When you first create your trust, you may fund it correctly. You may re-title all of your accounts and house to the trust with the help of your estate planning attorney. But, as the years go by, you may acquire new assets, and you may forget that they are supposed to be titled to your trust. You may sell your existing house and buy a new one. You may put it in your own name instead of your trust’s name. This could also happen while opening new investment accounts, checking and savings accounts or even businesses. If on your death, there are assets that are not properly titled to your trust, your will plays an important role in getting those assets titled to your trust on your death.
A Beneficiary Designation Goes Missing
The same is true for beneficiary designations. It is not uncommon for clients to be diligent about putting beneficiary designations on their accounts during the estate planning process. But, as time goes on, they open new accounts. Sometimes, they forget to add designations to those accounts. Or, sometimes, they forget to update the beneficiary designations when the beneficiary predeceases them. Sometimes it has nothing to do with the client, and the financial institution misplaces the beneficiary designation or doesn’t get transferred when the institution merges with another.
The same thing can happen with beneficiary deeds. When a client buys a new house, they may forget to have a new beneficiary deed drawn up. Or, they may move to a state where beneficiary deeds are not available.
Clients may also acquire assets that require where beneficiary designations and deeds aren’t readily available. These assets might include a business, a timeshare or a very expensive collection of personal property. In the event a beneficiary designation goes missing or is unavailable, your will will determine how those assets are distributed.
A Lawsuit
Your will not only answers the question of who gets your stuff when you die. It also answers the question of who should be in charge of administering your estate when you die. In Arizona, we call this person the Personal Representative, but other places call it an executor or administrator. Your will gives you the chance to choose who is in charge of your estate.
If a lawsuit needs to be brought on behalf of your estate there will likely need to be a probate to determine who the personal representative is. That way, there is someone who can represent the interests of your estate and make decisions. While most of us don’t anticipate that there will be a need to litigate after our death one never knows. An estate could pursue a wrongful death or medical malpractice or even to substitute in litigation you may have started during your lifetime.
So, do you need one?
If you have set up your estate plan to avoid probate, it’s probable that your will won’t need to be used. But, it is best to have one, just in case one of these scenarios arises. It is better safe than sorry!
2 Responses
Great article. One of the more common reasons why probate is needed is that a couple is relying on joint tenancy. On the first death, all that is needed is a death certificate to retitle property in the surviving spouse’s name. When the surviving spouse dies, all of the couple’s property often ends up in the surviving spouse’s probate estate. Similarly, if the surviving spouse fails to retitle assets in his or her name, such as life insurance insuring the first spouse to die, the proceeds do not pass to the contingent beneficiary, but is usually payable to the surviving spouse’s (probate) estate.
I agree. When Norman Dacey wrote his book “How to Avoid Probate” in the 1960s, starting the living trust mania, he included a chapter, “You Still Need a Will,” or words to that effect. In addition to HAVING a pourover will, it is important to impress on the client the need to safeguard the executed original so that it will be available in case it is needed. That is especially important if the dispositive plan set forth in the trust varies from the law of intestate succession. If the original of the pourover will cannot be found, or if the presumption of destruction with intent to revoke applies and cannot be rebutted, the assets subject to probate may pass to persons the client intended to disinherit. Several times, I will meet with a person whose parent has died, notice that one or more assets appear to require a probate, and inquire about the will. “Oh, mother did not have a will, she had a trust.” Sigh. I then gently explain that merely signing a trust is not sufficient. Sometimes the client is able to locate the original pourover will.