An Advisor's Guide to Wills

Many clients don’t want to think about the consequences of acting or failing to act upon their will, and it’s not hard to imagine why.

No one likes to think about their own death, but as your clients’ advisor, helping to guide the proper creation, maintenance and execution of their will can be one of the most important services we can provide.

As the author of this article, I would like to point out that I am not an attorney. But as a former advisor and current financial planner, the following may help advisors when reviewing their clients’ wills and estate documents.

As financial advisors, we can help to ensure that our clients’ intentions are clear and communicated effectively to those charged with implementing their wishes.

Every year, thousands of wills are contested, disrupting the rollout of a client’s last wishes and unnecessarily injecting chaos into the lives of their family and friends.

Advisors may wish to consider four critical steps:

1. Planning.
2. Error and challenge prevention.
3. Possessions.
4. Taxation.

Remember that we are not providing legal advice; rather, we are facilitating conversations between our clients and their legal advisors.

Will Planning Essentials

A will doesn’t have to be complicated, but making one should not be put off, Unchallenged, many clients delay making their postmortem decisions until it is too late, possibly upending your clients’ intentions or delaying their estate settlement.

According to a 2021 report, it takes 16 months on average to settle an estate without a will, five months longer than an estate with a will.

Can your client’s beneficiaries wait a year and a half to receive the assets that they are due? Even if they are not financially dependent on receiving those assets, the uncertainty and timing of the estate settlement can be avoided with some simple direction from your client and their legal advisor.

Further, for estates that are ‘”intestate,” or without a valid will, how a client’s assets may be divided will likely be determined by their’ home state.

Those determinations may be fair (and consistent from one estate to another), but they may not serve the beneficiaries or the clients’ intentions.

Assets can go to people who are not competent to make responsible decisions about the assets they have received or may leave loved ones feeling snubbed if the state divides assets in a way they view as unfair.

Worse, such settlements can emotionally divide families, particularly if your clients’ family is a complex one.

Do your clients really want to run that risk?

Executors and Trustees

Determining if your clients’ executor and trustee selections are appropriate is one of the key steps to ensuring a will accurately reflects their wishes.

The right executor can make complicated situations simpler, determine how to best navigate the estate and provide for your clients’ intentions.

Giving sufficient permission for that executor to make decisions on behalf of the estate can simplify the process.

For example, if the estate executor is also an heir, which occurs often, does the will provide too much or too little discretion in the exercise of their powers?

Does the executor or trustee have appropriate tax planning powers, such as the ability to make pro-rata distributions?

Do their trustee powers risk adverse tax consequences such as the loss of a marital deduction or the inclusion of an asset in the estate when trying to remove that asset from probate?

Will Bequests and Will Recipients

In reviewing a client’s will, attention must be paid as to who will receive the bequests of the estate, particularly whether the assets are to pass outright or through a trust.

The will must also specify timing, control and amounts of your client’s asset transfers.

Does your client risk passing assets to children or grandchildren who may not be of age or temperament to responsibly make decisions on their own behalf?

If minors are involved in the bequests, does the will nominate a guardian for the children’s interests and provide appropriate powers or compensation?

Should a trust be created to ensure these assets are available when needed?

Are there generation-skipping transfer tax considerations, based on the bequests detailed in the will?

Anti-Lapse Provisions

Does the will incorporate anti-lapse provisions, designed to be enacted if the specific heir has died? An anti-lapse provision can prevent deceased heirs from becoming effectively disinherited from the allotted bequest.

For example: If a child predeceases a parent, anti-lapse provisions will prevent the child’s spouse or family from being accidentally disinherited.