A will is one of the simplest yet most powerful documents you can write. A will can decide what happens to valuable property, even billions of dollars worth. It can decide who becomes the guardian of minor children, who controls a business or other entity, and how much of your wealth goes to the government. The will definitely is a requirement of every estate plan.
But a will cannot do everything that is essential to a good estate plan. And there are some things you just aren’t allowed to do in a will. Let’s take a look at some of these limits and what you can do about them.
A will has no effect over property whose ownership is controlled by law. For example, if you own property jointly with someone, the co-owner normally becomes full owner upon your death. You cannot use the will to give your share to someone else. Likewise, life insurance benefits go to the beneficiary named in the policy, and that cannot be changed in your will. The same applies to annuities and qualified retirement plans, including IRAs. You name beneficiaries in the plan documents or other forms, and that’s who inherits the account. It doesn’t matter what you say about the property in your will.
If you set up a living trust, the trust documents control who receives the property and income. You cannot change that in your will. The only time a will overrides a trust is when the trust document gives you a “power of appointment.” Normally you can exercise that power in a will to direct who inherits the trust property. But a trust with a power of appointment generally gets taxed in your estate, so most trusts don’t have this power.
Here’s something that few people realize, because they spend a lot of space addressing this issue in their wills. Your will cannot control what is done with your body, how your funeral is arranged, or anything of that nature. In fact, you have no legal control over these matters. You can leave directions and letters covering them to your executor and relatives. But they are under no legal obligation to follow your wishes.
You also cannot provide for the care of a disabled person or minor in a will. It is better to set up a trust through your will or during your lifetime. The trustee has to follow the directions in the trust agreement.
You can, of course, disinherit someone through your will. The only exception in most states is your spouse. A spouse generally is entitled to a minimum share of the other spouse’s estate, usually between one-third and two-thirds of the estate. But you don’t have to leave your spouse more than that, and you don’t have to provide for anyone else unless you made a binding promise to him or her.
If you are disinheriting someone who ordinarily would be considered a loved one or a natural object of your affection, then you should state that in the will. Otherwise, the disinherited person, usually a child, could effectively argue that you or your lawyer simply made a mistake and accidentally left out his or her name. You don’t have to state a reason for disinheriting, but most lawyers believe it is wise to state a brief reason. That might prevent a lawsuit claiming that you were unduly influenced by someone or weren’t mentally competent. A good reason is that you believe you amply gave to them during your lifetime or that they have acquired adequate resources on their own.
A disinherited person still can challenge a will. That’s why some wills leave at least something to everyone, then include a clause stating that anyone who challenges the will and loses, gets nothing, known as an in terrorem clause. That is a deterrent from tying the estate up in the courts and siphoning the bulk of it in lawyer’s fees. But it doesn’t always stop lawsuits. Disgruntled heirs can sue other people instead of challenging the will directly. For example, a charity that solicited your donation might be sued for interfering with a child’s expected inheritance.
What about strings or conditions on gifts? You can put any string or condition on a gift if it is not against public policy as determined by the courts. Today, that generally means most racial restrictions are eliminated as are actions that violate the law or encourage the violation of the law. For example, you probably cannot leave a scholarship fund for “whites only”. It is an open question whether you can make an inheritance contingent on the beneficiary not marrying outside a race or religion.
But you can do almost anything else. You can even make gifts contingent on the beneficiary’s being married, staying married, or being employed. One fellow was denied membership in a club during his lifetime. He provided that his daughter could inherit only as long as she did not marry a member of that club. In another case, Canadian courts upheld a will in which the deceased left his estate to the woman who had the most children in the 10 years following his death. Several women had nine children each and split the estate.
One will left the entire estate to the only child on the condition that he be a registered Republican, a member of the Moose lodge, never change his surname, be employed in either the family business or certain specified occupations, have his wife sign a post-nuptial agreement, and attend a Christian church with his family at least twice a month. None of those objectives appears to be against public policy, so the will probably is legal. The will was not challenged.
Of course, there’s the question of who is going to enforce such restrictions. Suppose the son met all these qualifications, received the inheritance, and the estate was settled and closed. Five years later, he becomes a Democrat, quits the Moose lodge, and stops going to church. Is the executor now going to hire a lawyer and ask a court to get the money back? Probably not.
Wills are very flexible and powerful. But they do have limits. You need to determine your goals, then meet with an estate planner to decide how best to achieve your goals. Part of the solution will be a will, but other actions and tools also will be needed.