Money Talks News’ recent article entitled “7 Things You Should Not Include in Your Will” suggests that as you think about what to put in your will, note that estate planning attorneys caution against including the following items.
- Leaving a buck to someone you want to disinherit. The thought is that leaving a single dollar to someone you are disinheriting will prevent them from contesting a will. However, it could have the opposite effect. Instead of keeping them out of the process, making someone an interested party allows them into the court proceedings. They could contest the will.
- Adding a non-contestability clause. These clauses say that if someone contests the will, they forfeit any inheritance due to them. However, the problem with non-contestability clauses is that they only deter people who have something to lose in the will. Many states will allow challenges to be made under certain circumstances, even if there is a no-contest clause in place. In fact, Florida and Indiana will not enforce them at all. 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.
- Retirement plans. Accounts like 401(k) plans and IRAs also should be left out of wills. That is because of tax implications. The IRS has rules about how these accounts are to be transferred if your heirs want to avoid a large tax bill. Instead, make sure that the beneficiaries are named on the accounts, so they can bypass the court system.
- Trusts. Some people use their will to create a testamentary trust that holds and distributes assets after their death. However, if you embed a trust in a will, you will have to go through probate. Ask an experienced estate planning attorney about setting up a revocable – or living – trust to do the same thing without the need to go through probate.
- Accounts with beneficiaries. Assign 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. Beneficiary designations will supersede the will, so you can leave those accounts out if you have recorded beneficiaries for each asset.
- Detailed financial information. The bank accounts you have now might not be those you have when you die. As a result, there is no need to divvy up specific accounts among your heirs in a will. You can create a financial cheat sheet outside of your will that will make it easy for your executor to locate all of your assets.
- Naming an out-of-state personal representative. Prior to designating this person, double-check your state laws because some states do not permit non-family members who are out-of-state to be a personal representative.
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