Under the Hood: What You Need to Know About Wills, Pt. I: The Checklist

Estate planning may only be one part of the financial planning process, but it is vital to affluent and high-net-worth clients. As life expectancies continue to rise, the wealth of these clients should increase accordingly, lending greater importance to this discipline. 

In this article, the first in a series, we’ll discuss specifically what advisors should be looking for when reviewing a client’s will.

To accomplish this and to standardize the process, a few years ago I created a 74-point Will Checklist. In essence, I divided the will into sections or clauses listing the relevant points in each. Although the section names may vary from one practitioner to the next, the overall content is the primary issue. Therefore, by following this type of process, you will demonstrate to clients that you are a holistic planner with a strong value proposition. Now let’s cover some essential background. 

The Basics: The Will and the Estate

A person’s gross estate comprises everything owned at death. This differs from the probate estate which consists only of assets that are subject to the probate process. For example, assets titled jointly or assets with a valid beneficiary designation are not part of the probate estate. The probate estate, therefore, is a component of the gross estate.

A will is a legal document governed by state law and is used to designate who will receive one’s probate estate.  In short, all assets included in the will are subject to the probate process. The will is an important document or dispositive tool but not the primary one.

For example, if a person has an IRA, life insurance policy or annuity, the beneficiary designation will supersede any directives in the will. As a result, all assets which are not transferred via joint titling or a valid beneficiary designation will be transferred according to the will and subject to probate.

The Clauses of a Will

A will is divided into multiple sections or clauses which include:

1) Introduction

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 

Let’s examine clauses one through four and the specific issues to check. 

1) Introductory Clause

Issues to check:

Does the will state that it revokes all prior wills and codicils?

Is the name of the testator (the person making the will) spelled correctly?

Does the testator have any AKAs?

Is the domicile correct?

Does the will clearly identify all family members?

Is there any question as to the testator’s mental capacity?

2) Debts Clause

Issues to check:

Does the will specify how debts will be paid?

Example: Will the debt burden be shared pro-rata or paid from specific assets?

Have debt balances changed drastically since the will was created?

Will the debt of a bequeathed property become an obligation of the legatee?

Example: Will the person who inherits the house be responsible for its mortgage?