Filed Under:Life Insurance, Life Planning Strategies

How to review a will: a 12-point checklist

A will is the legal document that specifies how a person wants to dispose of the real and personal property owned in his own name at the time of his death. Most mentally competent adults have the legal capacity to draw a will. But few persons are knowledgeable enough to do so properly. Only an attorney should draft a will and even most attorneys should not attempt to draw their own.

See our infographic: Death by the numbers

Despite this, every member of the estate planning team, including the financial planner, should know how to review a will.

First, it is necessary to coordinate the will properly with other dispositive documents such as employee benefit plans. For example, if the will is not synchronized with an executive’s pension, group and personal life insurance, and 401(k) or other retirement plan, there is no way to minimize overall death taxes and provide for a smooth and efficient estate administration. Also, if the will establishes trusts for minor children, the beneficiary designation of any other dispositive document must properly direct the assets to that trust.

Second, it is impossible to know if there will be appropriate liquidity to pay taxes and other estate expenses unless the will and its various dispositive schemes are examined.

Third, wills quickly become outdated and tax laws change rapidly. For instance, a marital deduction provision in a will drafted before September 13, 1981, may not qualify for the unlimited marital deduction; TRA ’97 increased the unified credit in a series of steps and introduced a family-owned business exclusion; EGTRRA 2001 introduced a slow but steady increase in the unified credit, a gradual reduction in the top estate tax rates, and a repeal of the estate tax for one year in 2010, TRA 2010 lowered rates, increased the exclusion, unified the gift and estate tax systems, and introduced “portability “of the exemption between spouses. And starting in 2013, much of what occurred in 2010 was made permanent – and still more changed. The circumstances, needs, and desires of the client and his or her or their beneficiaries are always in flux. The attorney who drafted the will may have died and it may have been many years since the will was revised or reviewed by either the client or attorney. Since wills are generally drafted to address the conditions which exist at the time of drafting, it is essential to review the will at least every two or three years and after every major tax law change or major events in the client’s life to make sure it is consistent with conditions as times change.

Fourth, state laws can change with respect to the operation of estates and trusts. For example, many states have adopted all or part of the Uniform Principal and Income Act (UPIA) and the Uniform Trust Code (UTC). Both of these laws change how estates and trusts are to be administered. It is important to keep your documents up to date to address both tax and non-tax changes to the law.

Every professional in the estate planning team must therefore be able to examine a will and spot – in general terms at least – what’s wrong.

“What’s wrong” with a given will is more often a question of what has been omitted or what has changed or what are the present objectives of the client than what has been improperly drafted. “What’s wrong” is even more often the failure of the draftsman to match the facts of the case or the circumstances or desires of the parties with the provisions in the documents. “What’s wrong” may be something the accountant, for instance, knows that no other professional knows. “What’s wrong” may be that the will has not been updated for years and no longer addresses the current circumstances or client goals or latest tax law. “What’s wrong” may be that a will alone – without a trust or the use of other tools or techniques – is inadequate or does not maximize the possibility to accomplish the client’s objectives with greater certainty and lesser cost. “What’s wrong” may be even be an inadequacy of cash to pay taxes or to maintain the client’s survivors’ lifestyle or achieve charitable objectives.

The following is a (by no means complete) checklist designed to give each member of the estate planning team the tools needed to examine a will.

1. Introductory clause

Start with the introductory (exordium) clause, which should be the first paragraph in the will. The purpose of this preamble is to

(1)  identify the testator, the person disposing of property at death;

(2)  establish domicile, the county that will have legal jurisdiction for purposes of determining the validity of the will and interpreting will provisions, for purposes of state inheritance taxation (technically, what is said in a will about the testator’s domicile is not dispositive but it is evidence which will usually be considered even if subordinated to proof of facts to the contrary);

(3)  declare that the document in question is intended to dispose of the testator’s property at death and no matter how many wills have been written in the past, this is meant to be the last will; and

(4)  revoke all prior wills. This is designed to nullify old and forgotten wills – and “codicils” (legally effective modifications of existing wills).

An example of this introductory clause is:

I, Morey S. Rosenbloom, a resident of and domiciled in the city of Bryn Mawr in Montgomery County, Pennsylvania, declare this to be my last will. I revoke all wills and codicils made prior to this will.

Planners should check:

(1)   Is the spelling of the client’s name correct? Has the client’s full name been used?

(2)   Is the client A/K/A (also known as), i.e., is there some other name by which the client is known and should that name be listed?

(3)   Is the domicile correct? For tax or other planning purposes, would it make sense to begin to document a different domicile? Will the will meet all the statutory requirements of the stated domicile? If the client spends a great deal of time in more than one residence, could the address mentioned in the will trigger a “double domicile” problem (e.g., where more than one state claims the decedent was a domiciliary of the state and therefore has the right to impose a death tax)?

(4)   Is there a reason prior wills and codicils should not be revoked? Instead of a new will, should the present document be a codicil making a small change but otherwise ratifying an existing will? For instance, if there is a potential for an attack on this will on the grounds of mental incompetency, fraud, or undue influence, a prior will providing a similar disposition will help prove the mental capacity of the testator and may discourage would-be contestants from attacking the current will. Conversely, if a beneficiary has been deleted, a new will should be drawn rather than a codicil to avoid the mention of the eliminated beneficiary.

After the introductory clause, the will can take either of two directions. It can (1) describe the steps that take place in administering the testator’s estate (such as payment of debts and taxes and then payment of legacies) or it can (2) dispose of legacies first and describe obligations later. We will take the former approach in formulating this checklist.

2. Debts clause

The next clause usually pertains to the payment of debts, expenses, and costs. The purposes of this clause are:

(1)   To state the source from which each debt will be paid. (This is an extremely important point because of the death tax implications. For instance, if a surviving spouse rather than some other beneficiary must pay debts, to that extent the marital deduction will be decreased and taxes may be increased. Furthermore, if the burden falls on the wrong person(s), the testator’s goals may not be met.)

(2)   To establish as debts items that might not otherwise be considered the testator’s obligations.

An example of the payment of debts clause is:

I direct all of my lawfully enforceable debts (including any expenses of my last illness) and my funeral expenses be paid.

It is important to reference “lawfully enforceable debts”; because some debts may not be enforceable. For example, some debts may barred by the statute of limitations. If you direct all debts be paid, your executor may have to pay debts that they would not otherwise legally have to pay.

Planners should check:

(1)   Does the testator have any rights to property held in the trust of another person (a so-called “power of appointment”) and, if so, what effect does the debts clause have on that property? Does it expose that property to the claims of creditors? Also, do those assets get “blended” with the probate estate and became part of the probate estate or do the trust assets pass directly from the other trust to the beneficiaries of that trust? Whether or not the assets passing from that other trust become part of the probate estate can be important if there are creditors of the testator. These creditors look to the assets within the probate estate to satisfy their claims.

(2)   Will the beneficiaries receive more or less than the client intended when the will was drawn because of the operation of this provision? Has the size of the debt changed since the will was drawn? What will be the federal and state death tax impact of the clause?

(3)   What is the effect of the Equal Rights Amendment in the state of domicile? In some states, the will of a married woman should contain a direction to pay debts and taxes. Otherwise, the burden of her funeral and medical expenses will be placed on her surviving husband – thus barring a deduction for payment of those expenses by her estate.

(4)   Did the will provide detailed funeral arrangements? Most authorities feel this is inadvisable since the will may not be found or may not be accessible in sufficient time after the testator’s death. Should such provisions be placed in a “Letter of Instructions,” an informal and nonlegal list of requests, suggestions, and recommendations that should not be placed in the will? Some states have separate directives with burial instructions.

(5)   Does the client intend that “payment of debts” include the mortgage on property left to a specific individual? In some states, absent an express direction to the contrary, when specific property is left to an individual (a “specific bequest”), any debt on that property will not be paid off. In other states, such a clause will require the executor to satisfy the mortgage. Does the named beneficiary of a life insurance policy that has been pledged as the collateral for a loan have the right to have the loan paid off because of the “pay my [just] debts” clause? The planner must check state law. In at least one state, the answer depends on who the lender is. The result, absent specific direction to the contrary, is one way if the lender is the insurance company (the beneficiary takes only the net proceeds) and another (the beneficiary is entitled to have the estate pay off the debt out of other estate assets) if the creditor is an independent lending institution.

3. Tax clause

The clause pertaining to the payment of death taxes can either be stated next or appear after the provisions disposing of property.

The purpose of the tax clause is to establish the source for the payment of the federal estate tax, the state inheritance and estate tax, and any federal or state generation-skipping transfer tax.

This is an example of a tax clause:

I direct that all inheritance, estate, transfer, succession, legacy and other death taxes upon property required to be included in my taxable estate whether or not passing under this Will [except (1) transfer taxes levied pursuant to the provisions of Chapter 13 of the Internal Revenue Code of 1986, relating to “generation-skipping transfers,” or any similar state law, and (2) taxes on property held in trust under the Will (or any revocable trust) of my spouse], and any interest and penalties thereon, shall be charged against and paid from my residuary estate passing under ArticleFOURTH of Part I of this my Will.

However, note that this tax clause charges the taxes on all assets which are “included in my taxable estate whether or not passing under this Will” to the residuary estate. This means that if there are joint assets, life insurance, retirement assets – or any asset that passes through a beneficiary designation; the taxes on such assets are paid from the residuary estate. If the residuary beneficiaries are not the same as the recipient of these other assets, then some individuals are paying taxes on assets which they are not receiving. While there are many situations where this may be appropriate, it is important to consider the ramifications of this approach.

Planners should check:

(1)   State “apportionment” statutes. If there is no tax clause in the will or if it does not adequately address the payment of a particular death tax, state law will allocate the burden of taxes among the beneficiaries. Many states require beneficiaries to pay a share of estate taxes unless the will provides otherwise. The result is often an inappropriate or unintended reduction of the shares of certain beneficiaries or adverse tax consequences. (For example, there may be a spiraling reduction of the estate tax marital deduction. The deduction is allowed only for the net amount passing to the surviving spouse. If that amount is reduced by an estate tax burden, the tax increases – further reducing the amount passing to the spouse, etc.) An “anti-apportionment” tax clause may be the solution. For instance, suppose you wanted a child to receive $100,000 of your client’s $2,000,000 estate free and clear. Without special provision, that child would be forced to pay his share of taxes, or 1/20 of the total federal and state death taxes. With a special tax clause, the child will receive the entire $100,000.

(2)   Does the client expect or want property passing outside the probate estate to pay its share of tax if the disposition of that non-probate asset generates tax? For instance, assume $1,000,000 of pension proceeds (or life insurance) is payable to the client’s two oldest children and $1,000,000 of cash is payable to the client’s two youngest children. Who is to pay the tax on the $2,000,000? What if the $1,000,000 of pension proceeds (or life insurance) is state inheritance tax exempt, but the cash is not? Unless the will provides to the contrary, estate taxes must be paid by recipients of property passing outside the will. The will should specify who pays taxes on both probate and nonprobate property.

(3)   Assume a sizable amount of property will pass through a revocable living trust. Is the tax clause in that instrument coordinated with the tax clause in the will, or are they incompatible? What if assets under the will are to “pour over” into a previously funded trust which itself will generate significant estate taxes. Is there (should there be) a will provision calling upon the trust to help the estate pay taxes? Does the trust have a provision recognizing and empowering a “call” on its assets to pay the probate estate’s taxes?

(4)   Who is to pay the tax on a generation-skipping transfer? Absent a contrary direction, the taxes will probably be payable from the assets of the fund subject to the tax. Some draftsmen specifically provide that such taxes are not to be imposed on the “skip person’s” estate.

(5)   Assume the facts indicate that very large taxable gifts have been made by the client. The taxable portion of these gifts – to the extent not included in the client’s gross estate – will be considered “adjusted taxable gifts.” They will increase the rate of federal estate tax payable on the taxable estate remaining. Will an unexpectedly high burden be placed on the assets remaining because of these prior gifts and should the tax clause take such gifts into account in apportioning the tax burden?

(6)   Should certain beneficiaries be insulated from tax for either tax reasons or to accomplish the dispositive goals of the client or better meet the needs of the beneficiaries? For example, should a child to whom property has been given be exempted by the will from paying the estate tax on that property?

4. Tangible personal property clause

A clause pertaining to the disposition of tangible personal property is often next. The purposes of this clause are:

(1)   to provide for who will receive personal property, and the terms under which they will receive it; and

(2)   to make special dispositions among the persons and the organizations of the testator’s choice.

An example of the tangible personal property dispositive clause is:

I give to my daughter, Eva Grieg, all of my clothing, household furnishings, jewelry, automobiles, books, pictures, and all other articles of tangible personal property owned by me at the date of my death. If my daughter, Eva Grieg, does not survive me, I give the property mentioned above in equal shares to my grandchildren, Gretta and Gail Grieg or the survivor who is alive at the date of my death.

or

I give the Philadelphia Museum of Art my painting of “Helga” by Andrew Wyeth and my Douglas Mellor “Garvey with Parachute” photograph.

Planners should check:

(1)   Does (or should) the client make specific bequests of all “intimate” items such as a watch or ring? Absent such provisions, if personal property has been left to several individuals, the result is often needless expense in determining who gets what or reducing the estate to cash (not to mention the potential for bitter intrafamily fights). If specific bequests have been made, has each item been described in enough detail so that there will be no confusion as to which diamond ring the testator meant? (Use the same description as is found in the insurance policy covering the loss or theft of the item). In some cases it may make sense to take pictures of the personal property and indicate on the back of the picture how the items are to be disposed.

(2)   Has provision been made in case the item specifically left to a beneficiary is not owned by the decedent at death? For instance, what if one ring is sold and the proceeds are used to purchase a second. Does the named beneficiary receive the second ring?

(3)   If the item specifically bequeathed has been lost, stolen, etc. and the loss has been covered by insurance, would the client want the named beneficiary to receive the insurance? In many states, the bequest of an item of personal property does not – absent specific direction to the contrary – also pass the insurance covering the item.

(4)   Does the client intend to pass – under the category of personal property – cash in a safe deposit box, travelers’ checks, and cash found in his home or on his person? Does the client know that cash on deposit is typically not considered tangible personal property?

(5)   If the client has property in many different places, consider allowing the executor – at the expense of the estate – to take possession of the property “as and where is” (a provision which will permit the beneficiary to receive the property free of delivery costs, and protect the fiduciary and beneficiaries during administration from the risk that specific assets will be lost).

(6)   The phrase “personal effects” may not encompass items of household use or even a car. Consider specific mention of items of tangible personal property.

(7)   Is there a “catchall” phrase that passes the residue of tangible personal property? The phrase, “all other tangible personal property” should dispose of any residual property.

(8)   Should the will confirm that certain property such as household furnishings, silverware, etc. belongs to someone else?

(9)   Does this clause dispose of property by referring to an instrument outside the will? This “incorporation by reference” is not recommended since it often leads to litigation.

(10)  The use of the term “contents” should be avoided. Personal property should not be described by its location.

General checkup of legacies:

(1)   Has property been left outright to a minor who is legally incapable of handling it, or to a person under a physical, mental, or emotional handicap who does not have the physical or intellectual capacity? This also applies to naming such individuals as beneficiaries of non-probate assets. For example, the financial institutions may require a court appointed guardian before granting access to the assets passing to a minor beneficiary.

(2)   Are all beneficiaries named alive? Are there “backup” beneficiaries (at least two) for each beneficiary? Are they the beneficiaries the client currently desires?

(3)   Are any of the gifts conditioned on events or circumstances that are impossible, “against public policy,” or in violation of the Constitution? For example, a bequest would be invalidated by the courts if it were made on the condition that the recipient first divorce their spouse.

(4)   Are there gifts to “my issue” (which may unintentionally disinherit an adopted person; while states differ, in some states adopted children are considered issue, and in some states they are not). Also, in the case of same sex couples, the children may not be “issue” of both partners.

(5)   Do gifts to charities meet state law requirements? Has the charity’s full legal (corporate) name and address been stated? (The popular name is often different from the full legal name). Have you checked the IRS’s “Cumulative List of Organizations,” or obtained assurances from the charity itself, to make sure the gift to the charity will qualify for a tax deduction? Has the client named a backup charity? Check to be sure the will specifies that taxes are to be paid from the portion of the residue not passing to charity. Otherwise, what should be a tax-free bequest must bear its portion of the total taxes. That reduces the charity’s share and therefore increases taxes. This in turn creates a new cycle of problems.

(6)   If someone is intentionally omitted, have you checked state law to see if such an omission is permissible? Are there defamatory statements in the will concerning an heir? (At the probate of the will, such statements may become libelous and expose the client’s estate to an action for damages.)

(7)   Does the will make so many specific bequests of cash that the residuary estate doesn’t have enough left to pay estate taxes? Keep in mind that the IRS can attach the assets of any beneficiary for the unpaid estate tax. Check to be sure the executor will have a sufficient reserve of funds for paying estate tax and all the bequests to residuary beneficiaries.

(8)   Note that a tangible personal property clause should nearly always be used where the residue of the estate will be paid to a trust. Few clients want trusts involved in handling personal effects such as jewelry, or household furniture, antiques, or cars.

5. Devises of real estate clause

The next clause pertains to “devises,” testamentary grants of real property. The purposes of the devises clause are:

(1)   to specify which real estate is to be disposed of under the will and to dispose of that real estate, and

(2)   to handle the problems where the property has been sold or destroyed prior to the testator’s death.

An example of a devise is:

I leave my residence located at 2 Red Cedar Rd, Amelia Island, Florida to my daughter, Lara Leimberg. If, at the time of my death, I am no longer using the property at 2 Red Cedar Rd, Amelia Island, Florida as my residence, then this devise is to be void and of no effect; however, if I own any other real estate which I am using as my residence at that time, then, in such an event, I devise such other real estate to my daughter, Lara Leimberg. If my daughter, Lara Leimberg, does not survive me, this devise shall lapse and such real estate shall become part of my residuary estate.

6. Specific bequests of intangibles and cash

After disposing of tangible personal property and real estate, the will may then cover specific gifts of intangibles (property where the item itself is evidence of value) such as gifts of cash or accounts receivable. An example of a gift of an intangible asset is:

I give 100 shares of Facebook stock to my niece, Danielle Green.

or

I give the sum of Five Thousand ($5,000) dollars to my sister, Sara Black, if she survives me.

Planners should check:

(1)   Has provision been made in the event the primary beneficiary does not survive the decedent?

(2)  Does the will spell out what gift, if any, is made if the decedent does not possess, at the time of death, the stock mentioned in the will? What if the stock had been sold but new stock was purchased with the proceeds? What if there was a stock split and only a specified number of shares were given?

See also: 10 things to know about how investments are taxed

7. Residuary clause

The next clause is called the “residuary clause.” The purposes of the residuary clause are to:

(1)   transfer all assets not disposed of up to this point,

(2)   (in some cases) provide a mechanism for “pouring over” assets from the will to a previously established (inter vivos) trust (if a pour over is made, it is important to review the trust as carefully as the will itself), and

(3)   provide for an alternative disposition in case the primary beneficiary has died or the trust to which probate assets (assets passing under a valid will or by intestacy) were to be poured over was for some reason invalid, previously revoked, or never came into existence.

An example of a residuary clause is:

All the rest, residue, and remainder of the property that I own at the date of my death, real and personal, tangible or intangible, regardless of where it is situated, I leave to my daughter, Larrissa Grieg. But if Larrissa Grieg does not survive me, then I leave the said property in equal shares to my grandchildren, Ronald Reimus and Reginald Reimus or to the survivor of them, per stirpes.

By including the reference to per stirpes, you can insure that if either Ronald or Reginald is deceased, but survived by children of their own, the bequest will pass to Ronald or Reginald’s children.

Planners should check:

(1)   Has a spouse been disinherited? If so, is the client aware of the elective rights (rights to a portion of the probate estate and perhaps certain other property owned by the decedent at death regardless of what the will provides) the surviving spouse has even if the will is valid? (It may be possible to control the surviving spouse to some degree by inserting a provision at least as attractive as the spouse’s intestate share, or by a provision reducing or eliminating the share of a person in whom the spouse is interested if he exercises his right of election. An alternative is a pre- or post-nuptial agreement).

(2)   Has the client, inadvertently, exercised a power of appointment (a right to direct the disposition of property in a trust established by someone else)? In some states, a residuary clause automatically exercises a general power of appointment, unless the trust requires that it must be specifically referred to in order to make a valid exercise or unless the will itself states that no exercise is intended.

(3)   Is there a disposition to a young adult, minor, or a person legally, mentally, or emotionally incompetent that should be made in trust? Is there provision for the executor to retain the property during the minority of such a person, or to use income or principal for that person’s benefit? Has the right person been named as the custodian of a child’s property, and are there backups in case that person is unwilling or unable to serve?

(4)   Is there a default provision in case a trust into which the residue was to have poured is for any reason revoked or never came into existence?

(5)   If a child dies, will that child’s share pass to the parties desired by the client?

(6)   Does the will address the possibility of the birth of a child to the client (it’s never too late)?

(7)   Has the client, in lieu of leaving his residuary estate outright to his spouse, created a marital deduction formula disposition through a so-called formula clause?

Marital deduction formula clauses are very important to review and analyze. They are often found in the wills of clients who own assets of at least the unified credit equivalent $5,250,000 in 2013 (adjusted annually for inflation). Such clauses typically divide the client’s estate into two parts, one “marital” and the other “nonmarital.” The marital portion passes property to the client’s surviving spouse as part of the marital deduction and may contain an outright or trust disposition. The nonmarital portion is designed to set aside property exempted from federal estate tax by reason of the client’s available unified credit and passes property to persons other than the surviving spouse (or to a credit equivalent “bypass trust” for the benefit of the surviving spouse that will not be included in the spouse’s estate on his death). While assets are passing to a “bypass trust” as opposed to the surviving spouse, this does not mean that the spouse cannot be a beneficiary of the bypass trust.

NOTE: For the years beginning in 2011 surviving spouses can use the so-called “portability” provisions which allow them to add the unused estate tax exemption of the spouse who died most recently to their own. This provision, plus an increase in the exemption, amount to $5.25 million per person, enables married couples to transfer as much as $10.50 million tax-free to their children or other heirs – either by making lifetime gifts or through an estate plan. This may lessen the attractiveness of the bypass trust.

Particular care must be taken not to inadvertently over pack the bypass trust and pay less than expected or desired into the marital trust. This underfunding of the marital trust could easily occur due to increases in the unified credit exemption equivalent.

The language used in the formula typically takes the form of a fixed sum (a “pecuniary marital deduction”) or a fraction of the client’s residuary estate (a “fractional share marital deduction”). The formula clause (especially if it is a pecuniary one) will also have to contain a provision for funding the marital deduction when assets are distributed to it.

If the marital deduction clause directs that the property be held in trust, the surviving spouse must generally be entitled to all of the trust’s net income in each year, and no other person may have an interest in the income or principal during the survivor’s lifetime.

Any planner who regularly reviews client wills should familiarize himself with marital deduction requirements, or, at least, direct inquiries to persons who have expertise in this area. Also, if this type of plan is developed, it is not enough to simply draft the documents. Consideration must be given as to what assets are intended to pass into the bypass trust. This will often require that some of the client’s assets be retitled.

8. Powers clause

The next clause is often one pertaining to the powers of the executor (and trustee if the will establishes a “testamentary trust,” a trust created at the testator’s death under the will). The purposes of the powers clause are to:

(1)   give the executor (and trustee) specific power and authority over and above those provided by state law to enable the executor to conserve and manage the property, and

(2)   limit, where desired and appropriate, the executor’s power and authority (for instance, the client may not want the executor to make certain investments), and

(3)   provide authority to continue a business (or handle other property with special management or investment problems) and the special flexibility necessary to accomplish that objective, and

(4)   protect the executor against suit by other beneficiaries by specifying the powers necessary to accomplish the executor’s role.

An (abbreviated) example of a powers clause is:

I authorize my executor (as well as any substitute executor) in his, her, or its discretion, with respect to all property, real and personal, in addition to the powers conferred by law, to:

1.    retain assets

2.    purchase investments

3.    hold cash

4.    vote and grant proxies

5.    sell, exchange, or dispose of assets

6.    distribute in cash or in kind

7.    delegate to agents (as permitted by applicable state law)

8.    assign or compromise claims

9.    borrow funds

10.  lease, manage, develop real estate

11.  abandon property

12.  make certain tax elections

13.  receive and use employee benefits, if such benefits are payable to the estate or trust

14.  disclaim assets

15.  manage and direct a business owned by the decedent’s estate.

Planners should check:

(1)   Are there any assets or problems for this particular client which requires special powers to fulfill the desires of the client or provide the executor with sufficient flexibility? (Beware of “boilerplate” clauses). Are there powers that should be added? Are there “standard” powers that should be removed or modified.

(2)   Will any power adversely affect the estate tax marital deduction? For instance, a marital deduction trust, under IRC Sections 2056(b)(5) or 2056(b)(7), must provide that the surviving spouse receive all income at least annually. Consider the impact of a power allowing the trustee under a testamentary trust to retain nonincome-producing property. Unless the will/trust also contains a provision allowing the surviving spouse to demand that the trust assets be sold or made income producing, the marital deduction may be lost.

Will such a power thwart other objectives of the testator? For instance, what if the unproductive property was stock in a family corporation? A sale of such stock would raise income, but could cause the loss of family control of the corporation.

Another problem can arise if the trust permits the trustee to withhold income distributions if those distributions would otherwise prevent the spouse from receiving Medicaid benefits. The power to withhold income for any reason may be enough to disqualify the trust from qualifying for the marital deduction. If such a provision is included in the document, it cannot apply to any trust which is intended to qualify for the marital deduction.

The draftsman might consider including a “savings clause” that would nullify any power, duty, or discretionary authority that might jeopardize the marital deduction.

(3)   Will any of the powers granted cause a conflict of interest? For instance, if the executor is a bank, discretionary authority to invest in its own securities or common trust funds will cause a conflict that must be specifically “forgiven” by the will (assuming the client wants to do so). Is the executor a business partner or co-shareholder of the insured? What problems might they create?

(4)   Is there specific authority for the executor to make distribution “in kind” (as opposed to selling estate assets and making the distribution in cash)? In some states, absent specified power to do so, the executor may have no choice: the distribution must be made in cash.

9. Appointment of fiduciaries clause

The appointment of the executor, trustee of any testamentary trust, and guardian of any minor child often comes toward the end of the will.

The purposes of the fiduciary appointment clause are:

(1)   to name the individual(s) or corporate fiduciary or combinations of individual(s) and fiduciaries who will administer the testator’s estate and any trust that the will creates;

(2)   to give the executor the appropriate power to act on behalf of the estate and carry out the terms of the will;

(3)   to specify if and how the executor is to be compensated;

(4)   state whether or not the executor is to post bond;

(5)   to specify the authority of and decision making process for co-executors; and

(6)   to name guardian(s) and successor guardian(s) of any minor child of the testator.

An example of the appointment clause is:

I appoint my nephew, Farnsworth Dowlrimple III, as the executor under this will. If for any reason he fails to qualify or ceases to act, I appoint the Left Bank and Trust of Overflow, Pa. as my executor. I confer upon my executor all the powers enumerated in clause _________ above. No executor shall be required to furnish any bond or other security in any jurisdiction. I direct that my nephew, Farnsworth, shall receive no compensation for his services as Executor and that the Left Bank and Trust of Overflow, Pa. be entitled to be compensated for its services as executor in accordance with its regularly adopted schedule of compensation in effect and applicable at the time of the performance of such services.

Planners should check:

(1)   Does the client trust the individual who is currently named as executor and backup executor? Is that individual or corporate fiduciary legally qualified to act as executor? (Has the attorney who drew the will been named as executor? Typically, absent special circumstances, this potentially raises ethical questions and the spectre of a conflict of interest.)

(2)   Should the executor’s bond be waived?

(3)   Is the executor named willing to serve? (How recently has the client checked?)

(4)   Is the guardian for minors willing to act? Is he able to act? Is that person suitable?

(5)   Is a prolonged estate (or trust) administration anticipated? If so, consider giving executors (trustees) the power to appoint successors by filing an instrument with the probate or other appropriate court.

10. Testator's signing clause

The next to the last clause in a will is typically the testator’s signing or “testimonium” provision. The purposes of the testimonium clause are

(1)   to establish that the document is intended to be the testator’s last will,

(2)   to meet statutory requirements that require the testator’s signature at the logical conclusion of the will, and

(3)   to state the date on which the will was signed.

An example of a testimonium clause is:

In witness of the above, I subscribe my name, this 11th day of October 2006 at Bryn Mawr, Pennsylvania to this, my last will, which consists of 14 pages (each of which I have initialed at the bottom).

Planners should check:

(1)   Is the will signed by the testator at its logical end? Is each page numbered? Is the page count correct?

(2)   Are there duplicate or triplicate signed wills in existence? If the testator was given a signed duplicate which is not found at his death, it is possible that a presumption will arise that the testator destroyed it with the intention of revoking it. The potential for litigation is therefore increased significantly. The better practice is for only one original to be executed.

11. Attestation clause

The final clause in a will is the “attestation” provision. The purposes of the attestation (often called the witness) clause are to:

(1)   witness the testator’s signing,

(2)   comply with statutory requirements,

(3)   underline the testamentary character of the document, and

(4)   comply with state law requirements in cases where the testator signed by a mark (such as an “X”) or where, at the testator’s direction and on his behalf, the will was signed by someone else (as would be the case where the testator was physically incapable of signing but mentally competent).

An example of an attestation clause is:

This will was signed by Edward Grieg, the testator, and declared to be his last will in our presence. We, at his request and in his presence and in the presence of each other, state that we witnessed his signing and declaration and at his request we have signed our names as witnesses this 11th day of October 2009.

Planners should check:

(1)   Are there three witnesses to the testator’s signing? Although most states require less, three witnesses will comply with the most stringent probate requirements of any state and, as a practical matter, provide stronger evidence of the competence and testamentary intent of the testator.

(2)   Were any of the witnesses beneficiaries under the will? This is generally inadvisable for at least two reasons: First, the witnesses may become incompetent to testify as to the execution or validity of the will. Second, witnesses who are also beneficiaries may be barred by state law from receiving bequests under the will.

(3)   Are the addresses of the witnesses stated? Although addresses may not be legally required, they make it easier to locate and identify witnesses when needed.

(4)   Is the will “self proving”? In some states, a notarized affidavit attached to the will signed by the witnesses (and in some states, the testator, also) that describes the circumstances of the execution of the will may permit the will to be admitted to probate without the requirement that the witnesses be found or appear before the court in the probate proceeding.

12. Other clauses

There are, of course, many other clauses that should be considered in reviewing a will. Some additional points for the planner to check are:

(1)   Is the federal estate tax marital deduction important? If so, consider that the Uniform Simultaneous Death Act, which applies in most states, presumes that the testator survives in the event of a simultaneous death involving the testator and a beneficiary. This would cause a loss of the estate tax marital deduction unless the will superseded state law by providing a “common disaster” clause. This provision makes the presumption that the testator’s spouse is deemed to have survived.

(2)   Does the will consider the possibility that one or more beneficiaries will disclaim any interest in the estate? The will should state who would receive property if the named beneficiary renounces his interest. The transfer is then treated as if the decedent had left property directly to the ultimate recipient.

(3)   Have the provisions in the will been coordinated with other dispositive instruments? For instance, is the will coordinated with all trusts, with employee benefit plans, buy-sell agreements, and life insurance beneficiary designations?

(4)   Are the problems of minors, incompetents, and other beneficiaries with special needs or circumstances properly addressed in the will? In other words, is the right asset going to the right person at the right time and in the right manner?

Has the client considered the financial burden that may be placed on the guardians of minor children, and have appropriate financial provisions been made so that they can afford to raise both the client’s children and their own? (Some may want to set up a special life insurance funded trust that, if necessary, can provide to the guardians needed dollars, but, if not, will go to the client’s children later in life.)

(5)   Is the client’s spouse’s will coordinated with the client’s will?

(6)   Is there a “spendthrift clause” to provide protection against the claims of creditors?

Conclusion

Although only an attorney should draft a will, every member of the estate planning team should make it a practice to review a client's will on a regular basis. The nonattorney's role in the will review process should not be thought of as a replacement for, or as a means of "second guessing," the attorney, but rather as a source of additional strength in the planning process. The estate planner can provide, in that regard, a valuable resource to ascertain how the client's total dispositive plan can most effectively and efficiently meet the current needs, circumstances and goals of both the client and the client's beneficiaries.

See also:

10 steps for avoiding estate planning mistakes

Should you be selling final expense insurance?

7 leading causes of death in the U.S. [infographic]

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