What’s the Difference Between a Simple Will and a Complex Will?
by Aubrey P. Boswell
Andrews & Barth, PC
Many times a client will ask an estate planning attorney to prepare for them a “simple” Will. Often what the client means when they say they need a simple Will is that they want a Will that leaves everything to their spouse or to their children (if their spouse does not survive). In the case of a single individual, they may want to leave their estate to their children or other persons or a charity. At first glance, such an estate plan can seem relatively simple and without complexity. But often, as the attorney digs deeper, questions arise that make the client’s situation more complicated than initially believed.
A checklist that the attorney can use when analyzing a client’s estate planning needs can help the attorney to have a consistent approach to each client. Here are a few factors to consider in any estate plan, including those that appear to be simple on the surface.
Selection of Executors, Trustees, and Agents. A client’s estate plan may not be complicated, but an essential aspect of any estate plan is to ensure that the Will names the proper persons as executors, trustees, and agents. In most estate plans between married couples, the client will name the surviving spouse as the initial fiduciary. If the surviving spouse is not able to serve, a successor fiduciary should be named. Generally, every estate plan should name two to three successor fiduciaries. Adult children of a client are good candidates to be named as successors. But what if the client’s children are minors, or the client intends to have children but does not have any right now? In this situation, it’s best to name a person who the client trust’s and who is financially responsible. The client’s parents may be good candidates in this situation. Finally, clients may wish to name a corporate fiduciary as the ultimate successor, in the event that all individual successor fiduciaries fail to serve. A corporate fiduciary will add a measure of durability to an estate plan, as it is far less likely that a corporate fiduciary will not be in existence if all other individual fiduciaries fail to serve.
Trust Planning. Another important factor to consider in an estate plan is the use of trusts. Leaving an inheritance in trust can help ensure the fulfillment of the client’s long-term desires after the client’s death. If the client is married and has children, leaving property in trust for the benefit of the surviving spouse, with the children as remainder beneficiaries, can better protect such assets against improper depletion during the surviving spouse’s lifetime. The trust for the surviving spouse can be written to constrain the surviving spouse from wantonly spending the assets on an excessive lifestyle. Such limits can also help avoid allowing a future partner of the surviving spouse to claim the assets in a divorce proceeding if the surviving spouse remarries later on.
Trusts can also be used to leave property to minor children as a substitute for a future guardianship. Additionally, trusts are useful to prevent a client’s children, even if adults, from receiving large amounts of money at an early age that may be a detriment to the child’s work incentive. Clients with beneficiaries who have special needs should also consider using trusts to allow someone else to manage the property on behalf of the beneficiary with special needs.
Tax Planning. Every client is different, and some clients will be wealthier than others. Proper estate planning should consider a client’s financial situation to ensure that the client does not unnecessarily pay taxes at his or her death. The federal estate tax exemption is currently $11.58 million per person. This exemption amount means that only 0.07% of persons who die in 2020 will be subject to estate tax. Despite such a small percentage, estate planners should not ignore tax planning when preparing a client’s estate plan. In 2026, the estate tax exemption amount will decrease to $5.6 million per person. While this amount is also relatively high, it will significantly increase the number of estates that will owe estate tax at that time. Besides, it is impossible to know when (or if) a client will subsequently revisit their estate plan. It is also much more likely that a client’s net worth will reach this level if the client is younger. Consider that a client today that has a $250,000 net worth and who can save $20,000 a year will have a $5.66 million net worth in 40 years with a 6% per year growth rate. Such a scenario does not account for inheritances that may be received or unexpected increases to the client’s net worth.
Planning for Contingencies. A client’s Will should prepare for the unexpected. Many clients make the mistake of only planning for their current situation. The attorney can provide great value to the client by helping the client to consider scenarios that may arise in the future, even if such scenarios are uncomfortable or that do not seem likely to the client. For example, what if the client has children in the future which were not planned? Has the Will properly addressed such a situation? Or, what if all of the client’s beneficiaries predecease the client? To whom does the client want his or her estate to pass? Does the client wish to leave his or her estate to a charity? What if the client’s spouse survives the client and remarries? Does this possibility change whether the client would want to use a trust for property left to the spouse? What if one of the client’s minor children develops a drug addiction in college? Should the trustee take into account the drug addiction when making distributions to the child? These and other scenarios should at least be contemplated and, at a minimum, discussed with the client.
Non-Testamentary Transfers. A common myth is that a Will controls all of a client’s assets at the client’s death. This notion is far from the truth and can potentially do great harm to a client’s estate plan if not addressed when planning the client’s estate. In general, retirement accounts, life insurance, annuities, and accounts with rights-of-survivorship (ROS) or which are payable-on-death (POD) all pass through non-testamentary transfers outside of the client’s Will. If the client fails to update these non-testamentary transfer assets to align with the client’s intentions at the time the Will is signed, then such assets may pass in a manner not desired by the client. For instance, a client may be single and have a 401(k) with his or her parents named as the beneficiaries. Later, the client may get married and create a Will that leaves everything to his or her spouse. If the client fails to update the beneficiary of the 401(k), then upon the client’s death, the 401(k) will pass to the client’s parents instead of the surviving spouse. This result would likely be contrary to what the client intended. If the 401(k) was a significant part of the client’s overall estate, this could be devastating to the surviving spouse. For this reason, it is critical to ensure that a client’s non-testamentary transfers coordinate with the client’s intentions when the client prepares his or her Will.
In Conclusion. Clients may view their estate planning situation as simple, and they may even ask their attorney to prepare a simple Will. But a skilled attorney should investigate the client’s case with the same diligence and thoroughness as the attorney would with any other Will. The results of the attorney’s analysis will guide whether the Will is a simple Will or a Will with more complexity. Developing a checklist of factors to consider can help the attorney apply a consistent approach to each client and may save the client and the attorney from a headache later on.
Aubrey Boswell is an attorney and CPA. His practice focuses on estate planning and probate matters. He has represented individuals and families at all levels of wealth to develop and implement planning strategies to accomplish estate planning objectives, minimize estate taxes, and protect assets and personal privacy. He has counseled and assisted personal representatives, executors, and trustees on trust and estate administration matters and the fulfillment of fiduciary duties. His experience also includes representing entrepreneurs and business owners as outside general counsel and advising on a variety of business matters and transactions.
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