By Ted Stricker, CFP®
Of all the areas of personal finance, estate planning is likely the least pleasant undertaking people consider. (After all, who really wants to consider the end of their own life?) As a result, it is often the most neglected aspect of one’s financial planning. And this can be a serious mistake.
Estate planning documents express the decedent’s last wishes regarding their assets and other matters where other means (verbal promises or statements) are subject to misinterpretation or conflicts among heirs and are not likely to be held valid by probate law. Without a legal Last Will, your legacy (now determined by others, like the Court) may be different than what you intended.
In addition, disposition of assets may need to address a number of personal belief issues, including where one’s principles may conflict with aspects of the law. Last Wills are also different from Living Wills, which address prolonging of life, organ donation intentions, and other end-of-life issues.
Understanding Potential Issues Ahead of Time
One of the first things to understand is that a legal Last Will & Testament differs from the Ethical Will, even though the two may overlap in some regards. The Ethical Will may address the decedent’s final legacy, instructions, parting wisdom, life lessons, and final wishes to their heirs. It is not a legal document, however, so for purposes of disposing of one’s assets, a Last Will and Testament document must be drafted and executed under the decedent’s state law prior to the person’s death and while they are cognitive to do so.
Another important reminder is that the legal Last Will should be carefully drafted to avoid issues particular to one’s own beliefs and to be sure specific bequests are honored. These may include bequests of tangible property (especially property with religious or emotional significance), desires to fund summer camp, special events for children or grandchildren, and charitable intentions.
It’s also critical to realize that the Last Will addresses only the decedent’s probate estate and therefore will be “proved” or processed in state probate court. Today there are many assets that may fall outside of probate and are not included in the probatable estate (and therefore are not part of the Last Will). These include assets held in joint name, or those with a beneficiary designation, including life insurance policies, traditional IRA and Roth IRA accounts, and deferred annuity contracts.
For these, the jointly held property will pass directly to the surviving owner. Accounts with beneficiary designations (or even Transfer-on-Death designations in some states) will pass directly to those named heirs, regardless of what the Last Will might state. Many people assume that their Last Will will cover all inheritance issues, but this may not be the case if the asset’s disposition bypasses the probate process.
Other Issues to Consider
The Last Will may also include your other important considerations and wishes. These might include:
- Should you include mandatory arbitration clauses, requiring disputes be brought before a qualified mediator or arbitrator? And should there be a separate agreement, signed by all heirs, that agree to be bound by the arbitration decision?
- Will your executor have personal beliefs or moral differences with carrying out your wishes as designated by your Last Will? Can a no-interest loan be made? If so, what are the tax implications?
- Should you include a mandatory distribution to all heirs to keep the peace within your family and to adhere to your beliefs?
- What about property outside the U.S., perhaps in other countries, or even other states? Does the Last Will address these, since the probate laws may be different for the disposition of these assets?
- Does the executor/executrix you’ve named understand your wishes and agree to abide by the terms and intentions of your Last Will? Are they competent to carry out the large responsibility required? Many assume the oldest child or eldest son should handle this task, but this individual may not be the wisest choice to efficiently handle the work. Is there a better choice or have you named an alternate/successor executor to step in if the primary named person is either unavailable or declines the responsibility?
- Have you consulted with all your trusted advisors regarding your intentions and wishes? Are there implications you haven’t considered that could conflict with your beliefs or personal philosophies?
Finally, it’s important to remember that, despite the probate laws that govern its provisions, a Last Will is a highly personal document whose instructions and contents need to be carefully weighed and considered. Given its importance to your legacy, this is not a DIY type of document; it should be crafted with the assistance of advisors to feel confident that personal/family interests, religious considerations, tax issues, and community are all addressed properly.
Collaborate With a Professional Team
Given all of the above, estate planning often means working with a team that includes specialists in accounting, tax, and wealth management. This team approach helps you look at multiple angles and who, along with legal professionals, can help coordinate and collaborate closely to help you construct a solid estate plan.
Partner With Us
If you’re ready to explore your estate and legacy planning, our team at Bernath + Rosenberg is here to guide you. With our Certified Public Accountants and CERTIFIED FINANCIAL PLANNER® professionals, we stay current with the latest in tax laws and estate planning strategies to help you plan for a smooth transition of your legacy, according to your unique and special objectives.
To get started and make the most of your hard work, schedule a meeting by calling (212) 221-1140 or email tstricker@brwealth.com.
About Ted
Ted Stricker is a partner and financial advisor at Bernath + Rosenberg, a full-service accounting, tax, and wealth management firm with offices in Monsey, NY, Lakewood, NJ, Cedarhurst, NY, and Miami Beach, FL. The firm demonstrates a personalized approach to custom-tailored solutions and an unwavering commitment to client service. With over 26 years of experience in the financial services industry, Ted manages the firm’s wealth management team, and specializes in designing financial plans for business owners and affluent families. Since joining the team in 2015, he provides practical and sound advice, combining innovative approaches and solutions that reflect clients’ personality, lifestyle, and goals.
For the ninth year in a row, Bernath + Rosenberg has been named as one of the leading CPA firms in financial planning by Accounting Today, a publication that receives hundreds of submissions each year and features the Top 150 Firms in the nation. Ted is a CERTIFIED FINANCIAL PLANNER® practitioner and is a member of the Financial Planning Association. To learn more about Ted, connect with him on LinkedIn.
