Under the Hood: What You Need to Know About Wills, Pt. 3: Fiduciaries and Trusts

10) Testators Signing Clause

Issues to check in the Testators Signingclause include:

Are all pages numbered correctly and initialed by the testator?

11) Attestation Clause

Issues to check in the Attestation Clause include:

Are there at least two witnesses?

Are any witnesses also beneficiaries of the estate?

12) Other Clauses and Provisions

Issues to check in this section include:

Is there a provision for disclaimed property?

Do any beneficiaries have special needs and does the will provide for this?

Is there a Credit Shelter provision?

Is there an ascertainable standard on all trusts?

Example: Assume the deceased spouse created a bypass trust in the will and gave the surviving spouse the right to demand income, from corpus, for “happiness.” What is the tax treatment of this trust?

Because the surviving spouse has such broad power, the trust assets will qualify for the marital deduction and will not be taxed (or included) in the estate of the deceased spouse. If the trust had an ascertainable standard such as, for the “health, education, maintenance, and support” of the surviving spouse (i.e. HEMS standard), it would be included in the deceased spouse’s estate, but not taxed as long as the amount transferred to the trust did not exceed the applicable exclusion ($5,340,000 in 2014).    

Does the will coordinate well with the non-probate estate?

Example: The probate estate passes according to the provisions in the will whereas the non-probate estate is transferred via beneficiary designations or to the survivor(s) of jointly held property. Therefore, the assets transferred in the will need to be coordinated with all other assets to assure the testator’s desires are met.

Is there an in terrorem clause?

This clause states that anyone who challenges the will forfeits his interest in the estate.

Example: If anyone challenges the will, or any part of it, they will be excluded in total or given only one dollar. However, if the will is declared invalid (due to mental capacity, undue influence or failure to be properly executed), the will, and hence this clause, would be rendered invalid.

Is there a common disaster clause?

This clause dictates who predeceases whom when it cannot be determined.

Is there a limited survivor clause?

This clause identifies the length of time a beneficiary must survive the decedent for property to transfer.

Conclusion

Estate planning is a broad discipline. As an advisor, I’ll review the will and make suggestions, but leave the final decisions to the client and the client’s attorney. Unless I believe the attorney has made an error (which has happened), I would yield to him. If I did find an error, I would first consult another estate attorney before discussing it with the client.

As I mentioned at the onset of this series of articles, an advisor can play a key role in a client’s estate planning. Moreover, if the advisor completes a comprehensive financial plan for the client, and the plan includes an estate section (hence, comprehensive), this section – at a minimum – can be given to the attorney, with the client’s permission.

This should provide the attorney with a more complete view, especially if it projects the client’s estate into the future. It could also save time for the attorney thereby potentially saving money for the client. It’s very important that the attorney does not view the advisor as a threat, but rather as someone fully invested in helping the client. If successful, the advisor will gain the respect of the attorney and deepen his relationship with the client.