What Your Will Can and Can’t Do for Your Estate Planning

A will is one of the 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 planning strategy.

Wills are very flexible and powerful, though they can be very simple. You can achieve many of the goals for the ultimate disposition of your wealth and possessions through the will.

Yet, wills have their limits. Of course, you can’t use them to change the ownership of some types of property. Jointly-held property usually is transferred by law to the co-owner after one owner dies. IRAs, employer retirement plans, life insurance, and annuities are controlled by the beneficiary designation forms. Any property owned by your living trust or any other trust is controlled by the terms of the trust, unless when the trust was created you reserved the power to change the trust terms through your will.

Many people don’t realize that in many states, your will has no legal effect over what is done with your body, how your funeral or memorial service is arranged, or anything of that nature. In most states you have no legal control over these matters. You can leave directions in your will or other documents for your executor and relatives, but they are under no legal obligation to follow your wishes.

You also can’t direct the care of a disabled person or minor in a will. It is better to do this through a trust that is set up either in your will or during your lifetime. The trustee has to follow the directions in the trust agreement.

Many people are interested in putting special Estate Planning requirements, qualifications, controls, and other unique provisions in their wills. Some people are worried that heirs won’t handle property well. Others want to use estate planning strategies to prohibit or discourage heirs from acting in certain ways, or encourage them to behave in particular ways.

The law allows you a lot of leeway, but there are some limits.

 You can, of course, disinherit almost anyone in 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, unless there is a valid prenuptial or postnuptial agreement. But you don’t have to leave your spouse more than that amount, known as the spousal election, and you don’t have to provide for anyone else unless you made a binding promise to him or her.

Most estate planning professionals advise that a disinheritance be explicit when the disinherited person normally would be considered a loved one or natural object of your affection. When you don’t state clearly in the will that the person is disinherited, 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. Good reasons to disinherit are that you believe you gave the person an ample amount during your lifetime or that the person has acquired adequate resources on his or her own.

A disinherited person still can challenge a will and cause the estate to spend a lot in legal fees. That’s why a better estate planning strategy might be to leave a little something to the person you want to disinherit, and 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.

In the will you also have broad discretion to put conditions, limits, controls, or requirements on bequests. The general rule is you can do anything in your will that is not against public policy or capricious. There are many court decisions on this issue, but it often boils down to a court’s opinion of what is public policy or capricious.

Today, it generally means most racial restrictions aren’t allowed on bequests or trusts. For example, you can’t leave a scholarship fund for “whites only.” In many states, though, you can make a bequest contingent on the person’s not marrying outside a religion or economic class. But you can’t make someone adhere to a particular faith as a requirement of an inheritance. Of course, you can’t require someone to commit illegal acts or neglect legal duties.

You can’t require someone to divorce a person to receive an inheritance. But in most states you can require someone to attend college or graduate school or prohibit them from marrying outside a religion and perhaps a nationality. Wills and trusts have been upheld that prohibited someone from marrying a domestic servant. You can require that someone keep or change a surname in order to inherit.

You can 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 postnuptial 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.

A will provision is likely to be considered capricious when it wastes money or property. Two examples of will provisions that weren’t allowed were a requirement that the doors and windows of a house be bricked up for 20 years and transferring assets to a trust to spend on a monthly funeral service for the deceased.

Of course, with some restrictions there’s a question of who will enforce them. When you require certain conditions at the time of inheritance, the executor likely will follow them. But when there are future restrictions, such as not marrying outside a faith, is the executor going to find out and hire a lawyer to get the money back? Does your estate planning require other beneficiaries of your estate to monitor and sue each other when the conditions aren’t met? Consider all the potential consequences before deciding to take an action in your will.

RW August 2011.