What follows is a brief discussion of important issues that can be addressed through a properly designed will.
SELECTING BENEFICIARIES TO INHERIT ASSETS
If you do not have a will, the government will often decide who receives your assets and in what proportions. Even though you can often control the disposition of assets by designating a person to receive an asset upon your death (for example, a POD or ITF designation on a bank account) such designations do not provide for selection of alternate beneficiaries if the POD or ITF beneficiary predeceases you.
SELECTING WHO WILL IMPLEMENT
THE TERMS AND CONDITIONS OF A WILL
Through a Will, you can identify who will serve as your Executor, Trustee of any trust that you create through your will and Guardian of your minor children.
The Executor is responsible for assembling all estate assets and properly distributing the assets to the beneficiaries identified in the Will. The Executor also makes sure that all estate obligations are satisfied, such as the payment of debts and taxes owed by the estate.
A Trustee is the person who manages the assets placed in trust for the person in need of a protective arrangement (discussed under the next heading).
A Guardian is the person who will raise a minor child if his or her parents are deceased. Even if you believe that no other reason for a will exists, the need to select a Guardian to raise your minor child is a vital reason to have a will.
Since you cannot be sure that an Executor, Trustee or Guardian will not die, become disabled or choose not to serve, a Will should identify one or more back-ups for each position.
CREATION OF PROTECTIVE ARRANGEMENTS
FOR BENEFICIARIES WHO CANNOT OR SHOULD NOT
HAVE OUTRIGHT CONTROL OF THEIR INHERITANCES
Many reasons exist for distributing a beneficiary’s inheritance to a trust rather than to the beneficiary directly. Providing for the management of a minor’s inheritance by a responsible adult until the child reaches an appropriate age (18, 21, 25, etc...) is probably the most common and most obvious reason.
However, equally important reasons for the creation of a trust include providing for disabled individuals or for people who cannot be expected to handle their money responsibly.
Leaving even a minimal inheritance to a disabled person who is receiving certain vital governmental benefits (such as SSI and Medicaid) can disqualify the disabled person from receiving such benefits. However, if the inheritance is directed to a special needs trust for the disabled person, the person can continue to receive governmental benefits and still have his or her standard of living enhanced by the inheritance.
Even if a person is not a minor or disabled, it may still be in the person’s best interest to have controls placed on his or her inheritance. Many people have legitimate fears that an inheritance may be squandered as a result of drugs, alcohol, undue influence or bad judgment and a trust can be the means by which a loved one can be provided for but still be protected against one’s self.
REDUCTION OF ESTATE TAXES
The Federal Government imposes estate taxes on estates in excess of $11,700,000. Effective January 1, 2018, the New Jersey Estate Tax was eliminated.
A flexible option that is available to address the possibility of a re-instituted estate tax is the inclusion of a credit shelter trust, funded through a disclaimer. This option is discussed on this site under the heading, “CREDIT SHELTER TRUSTS”.