Building Flexibility into Your Estate Plan

Submitted by: Craig A. Hatch, Esq., CELA

Any Will that is written is based on certain assumptions presented by the Testator, but should also have flexibility so that if predictable but undesired events occur there are protocols built into the plan. One of the most common is the presumption of the plan of distribution in the event of the death of a beneficiary. If an heir dies before the Testator, then the attorney will want to discuss with his or her client the contingent heir. Many times this will be the children of the deceased heir, but that should not be presumed. The following are some conditions, but not necessarily all, conditions that may be considered for flexibility purposes:

1. No Contest Clause

A no contest clause in a Will is designed to discourage an heir from challenging the plan of distribution or some other designation in the document. Prepared properly, these clauses can aid the administration process by serving as a shield for the executor by restraining difficult heirs and beneficiaries. Typically such clauses are written to require a forfeiture of most or all of a particular distribution if the heir in question brings any formal action against the executor or challenges the Will. To be upheld, the clauses cannot prohibit formal actions that are well-grounded in fact. The primary benefit of such a clause is to give pause to a disgruntled heir before that heir creates trouble for the estate.

2. Trust terms for distributions to Minors

If there is the possibility that an estate may generate a distribution to a minor either by direct bequest or as a contin- gent beneficiary, then the attorney should discuss with the Testator the proposed plan of distribution and designate a Trustee to manage the assets.

3. Disinheriting or limiting distributions to an heir receiving public benefits. If the Testator has a beneficiary who is older or is in poor health or is already receiving public benefits, it would be wise to suggest that the Testator consider either leaving no assets or providing limited access to the assets or income of the assets provided to that beneficiary.

4. Dealing with Personalty

Interestingly one of the most difficult issues that can arise in an estate administration is dealing with the personal property. If a child is living with a parent at the time of their death, it can be difficult to establish which property belonged to which individual. The same concern applies with a mixed marriage.

5. Review and Update Beneficiary Designations. Many people incorrectly assume that their Will covers the distribution of all of their assets. This is the case only for those assets held under your individual name that do not have a beneficiary designation. If you own property jointly or if there is a designated beneficiary, then that account will pass to the surviving joint owner or the listed beneficiary. If you are working with a financial advisor or institution, you should periodically request a status update on the listed ben- eficiaries and make certain that the beneficiaries match your goals. If you have charitable interests for consideration in your Will, it may make sense to change designations in your Will and retirement accounts to consider this for tax benefits and more easy administration for your executor. The tax benefits are something you should consider when meeting with your financial advisor or insurance agent as well as with your attorney.