At some level, American Wills have not changed much in the last 200 years: Just like in old-timey England you need to (1) state who gets what, particularly anything left-over (your residuary estate), (2) who shall manage your estate’s affairs (your Executor), (3) you need to sign your Will or have someone do it for you in your presence with your permission if you don’t do so yourself, and (4) you need two disinterested witnesses who sign your Will in your presence as you state it is your Will. However, there are a few modern developments and government programs that justify adding the following provisions to even the most routine Wills:
- Contingent Ownership of a 529 Plan: If you do not have a contingent owner of a 529 Plan that you own, you may want to specifically name who you would like to succeed you within your Will, or allow your Executor to name the new Owner.
- Ability to Create Trusts and Name Trustees: You never know whether one of your beneficiaries may become disabled, a spendthrift, he or she might end up divorcing, or could still be a minor when they receive their bequests. Allowing your Executor the ability to create trusts and name trustees should maximize the benefit to your heirs while minimizing on-going court supervision of your beneficiary’s financial matters.
- Ability to Create an UTMA Account: If your bequest to a minor is a relatively small amount, you may prefer to simply have the funds left to a Uniform Transfer to Minor’s Act account and have your Executor name the UTMA’s custodian who administers the funds (again, without recurring court oversight) until the minor reaches age 21.
- Conformity With “Stretch IRA” Distributions. If you name “My Estate” as your beneficiary under your IRA the funds must be distributed within 5 years, meaning income taxes may be unnecessarily accelerated. If, instead, you create a testamentary trust with the proper trust requirements to stretch the IRA, your beneficiaries should be able to maintain continued income tax deferral and compound IRA growth.
- A Mechanism to Name Future Executors. If the people you have named as Executor are unable or unwilling to serve, an interested party may have to Petition the court to be named as Executor. You may prefer having a mechanism to decide who should be able to succeed your initial choices, such as “All my living adult descendants shall vote by a majority who should serve” or “my beneficiaries shall unanimously choose an outside party to serve as Executor.”
Taking these steps may help minimize future court costs, maximize tax deferral, and leave proper guidance to your beneficiaries.