While the number of older Americans with wills has been dropping in recent years, that doesn’t mean you should forego this legal document.
A will outlines your instructions for how the court should distribute your assets after you die. Your heirs will still need to go to probate court, but having a valid will in place makes the process easier for everyone.
As you consider what to put in your will, keep in mind that estate planning attorneys caution against including the following items.
1. $1 to someone you want to disinherit
Somehow, the notion took hold that leaving a single dollar to someone you’re disinheriting will prevent them from contesting a will. However, it actually could have the opposite effect, according to Richard Ricciardi, an estate planning attorney and partner with firm Powell, Jackman, Stevens & Ricciardi in Fort Myers, Florida.
“I don’t know who invented it, but leaving someone a dollar makes them an interested party,” Ricciardi tells Money Talks News.
Rather than locking them out of the process, making someone an interested party invites them into the court proceedings. They will get court notices, and that could inadvertently encourage them to contest the will.
2. Non-contestability clause
Adding a non-contestability clause, or no-contest clause, is another way people try to avoid having their will challenged in court. These clauses indicate that if someone contests the will, they forfeit any inheritance due to them.
The problem with non-contestability clauses is that they only deter people who have something to lose in the will. What’s more, many states will allow challenges to be made under certain circumstances even if there is a no-contest clause in place.
Rather than rely on one of these clauses, consult with an estate planning attorney about other options if you think a disgruntled relative might challenge your will.
3. Retirement plans
Retirement accounts such as 401(k) plans and IRAs also should be left out of wills.
“They should never go through a will because of tax implications,” explains Patrick Simasko, an elder law attorney and wealth preservation specialist with Simasko Law in Mount Clemens, Michigan.
The IRS has specific rules about how these assets are to be transferred if your heirs want to avoid a large tax bill. Rather than leaving it up to the probate court to distribute money, Simasko tells Money Talks News that a better approach is to ensure beneficiaries are named on the accounts so they can bypass the court system.
4. Trusts
Some people use their will to create a testamentary trust that holds and distributes assets after their death. However, Ricciardi sees little reason to do so.
“If you embed a trust in [a will], you’re going through probate,” he says.
Setting up a revocable — or living — trust can accomplish the same thing without the need to go through the probate process.
5. Accounts with beneficiaries
To avoid the time and expense of probating a will, Simasko recommends assigning beneficiaries to accounts whenever possible. Accounts that have beneficiaries, transfer-on-death provisions or joint owners can be passed to heirs without any court involvement.
“[People] think the wills matter, and really, the wills are the least important document,” he says.
That’s because beneficiary designations will trump anything written in a will. So you can leave those accounts out so long as you’ve recorded beneficiaries for each asset.
6. Detailed financial information
The bank accounts you have now may not be the ones you have when you die. Therefore, there’s no need to divvy up specific accounts among your heirs in a will, according to Ricciardi. Instead, the court can look at your assets as a whole and distribute them according to your wishes — such as giving a specific amount or percentage to each person named.
While it doesn’t belong in the will, Ricciardi does recommend people create a financial cheat sheet that will make it easy for your personal representative to locate all of your assets. Let your representative know where they can find this sheet when it’s needed.
7. Out-of-state personal representative
Wills name a personal representative — or executor — who is responsible for working with the probate court and carrying out your wishes. Before naming this person, double-check your state laws.
“Some states do not allow non-family members who are out-of-state to be a personal representative,” Ricciardi says.
In that case, your best friend who lives across the country can’t fill this role, and the court will appoint someone else.
