Elder Law: Why you may not need a will

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“I thought everyone needed a will or all of your money and assets go to the state?”

Consider the most common question posed to us by new clients, family members or just general inquiries to the firm. It goes something like this: “I haven’t done a will since the kids were little. I think I need a new will. How much do yinz charge for that?” The answer, of course, is “it depends.”

Some things may well have changed since the kids were little (and, they may no longer be kids!). The Last Will and Testament is simply a document, or a tool used to achieve the goal of distributing property owned by the decedent in her/​his sole name at death.

Decades ago, the will was the primary tool to accomplish a client’s estate planning goals. However, as the children have grown and the “brick” phone became the “smartphone”, so, too, have estate planning tools. Thus, the key is to focus on the plan, not the tool(s), as once the appropriate plan is created, the tools can be selected for their unique purposes.

Think how things have changed that may now make the will somewhat obsolete:

1. Many of our clients from the Greatest Generation arrive in our offices with CDs, savings bonds and cash bank accounts. However, the Baby Boomers (and generations X through ZZ) will carry the majority of their life savings in qualified investment accounts — plans that are designed to offer individuals added tax benefits on top of their regular retirement plans, such as IRAs and 401(k) plans.

With this substantial shift to qualified plans, using a will to direct your IRA would be tax suicide (as well as subjecting it to probate unnecessarily). Think about which of your assets really need to be directed via a will once you remove the value of qualified investments. In addition, it is often difficult to set up a trust through a will to accept qualified investments.

2. “DDBB” — That’s the acronym we’ve coined to describe four troubling situations: Death, Divorce, Bankruptcy and Bad decisions; and we’re talking about the kids and grandkids. Once again, with the significant amount of qualified funds at risk, traditional planning using the will as the only tool just won’t be able to address the issues.

For example, one type of tool we frequently recommend is a Retirement Plan Trust. This type of trust is specifically designed to receive qualified investments for future generations, maximize the “stretch-out” of the IRA and still protect the beneficiaries/​heirs from the dreaded DDBBs of life.

3. People are living longer. When we started practicing law many moons ago, the common theme from clients was, “I want to make sure whatever I have goes to the beneficiaries I choose and for me to pay the least amount of taxes.” Fast-forward to the current state of affairs where it is common for people to live into their 90s and need extremely expensive long-term care (for those 65 and over, it’s been estimated that one will need $275,000 or so for future medical needs).

The will is simply a reactive document that cannot be used to protect assets during a person’s lifetime.

4. Speaking of disability, the number of younger people with disabilities or special needs has soared in the past few years, necessitating specialized planning to address multiple medical care and financial needs. This type of planning generally works well with the use of different types of trusts such as a Special Needs Trust, rather than a will.

Now don’t think we’re bashing wills here — quite the contrary. Almost everyone does need a will to supplement their estate plan. However, since few of us can do without our smartphones anymore, think of it this way: The next time you purchase a new cell phone, consider your “plan.” You can purchase a phone that only makes and receives phone calls. No texting, no Internet, no videos, no music, no apps that turn your phone into a flashlight.

That said, everyone needs a phone that makes and receives calls, but most would agree that given this day and age, we now have the “tools” available to cover a whole lot more.

So, get started in checking out your tool kit by remembering the Old Dutch proverb: “You cannot do anything by doing nothing.”

Julian Gray and Frank Petrich are both certified elder law attorneys with over 55 years of combined elder law experience who practice in the Pittsburgh area at Gray Elder Law. Send questions for consideration in this column to elderlawguys@grayelderlaw.com, and visit their website at www.grayelderlaw.com.


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