The Six Essential Provisions in Every Will

Financial advisors are strong proponents of estate planning and know that preparing a Will can avoid unintended consequences and provide their client with substantial peace of mind.  In this blog, I identify six essential provisions in every thoroughly prepared Will that ensure that the client’s wishes are carried out and their legacy preserved.  These essential provisions are not boilerplate.  Rather, they are foundational to the document and are tailorfit to meet each client’s needs.  You’ll be able to refer to this blog when you review documents for a new client or consider updates for your existing clients.  You’ll know when a subtle deeper dive, explanation or instruction is required to address these terms and you’ll be able to have natural and engaging conversations with your client about the things that matter to them that inform how these provisions will be structured.

Identify Immediate Family, Stepchildren and any Unique or Excluded Persons

A Will should identify any spouse, children (biological and adopted), and descendants of any deceased child. Clients are encouraged to talk openly about these people so that we can ascertain if any of them are excluded or should be treated with particular care or concern and, if so, why.  A Will should also identify any stepchildren and descendants of any deceased stepchild.  All this is to ensure that the client demonstrates his or her capacity and that we can help anticipate and thwart challenges to the estate.

Provide Flexible Distribution of Tangible Personal Property

Jewelry, artwork, vehicles and other items of tangible personal property can be some of the most nuanced or individual in their distribution.  Tennessee allows a Will to refer to a tangible personal property memo (“memo”) that the client can update at any time, without witnesses or a notary. Don’t let your client miss out on this simple opportunity to adjust for new possessions and relationships without any cost to update their plans.  Additionally, your client’s plans should indicate the persons who are to receive all remaining items of personal property not otherwise specifically given to anyone, and how those remaining items should be selected or divided.  The primary reason to include a clause that disposes of all remaining personal property separate from the other remainder of the estate is to avoid that remaining personal property be subjected to reduction for payment of debts, expenses and taxes, which would defeat the purpose of passing the whole of each remaining item of tangible personal property, such as a ring, a painting or set of fine china.  

Describe Specific Gifts and Conditions

As previously described, tangible personal property memos offer great flexibility; however, since some items are so important and their distribution is never to be changed, their distribution should be described in the Will, not the memo.  

Also, since real estate or interests therein (e.g. life estates, other tenancy or rights of use), cash, closely held businesses, and intellectual property do not constitute tangible personal property, they cannot be left on the memo.  Hence, if these items are to go to one person or another specific distribution of these items should be specifically included under a Will.  Therein, the Will may include other explanation or instruction that helps with the administrator, such as whether to withdraw all cash from a business prior to its distribution, or to transfer the contents in or on real estate with the real estate itself, etc.

Divide the Remaining Estate

Not every item can or should be distributed one by one. In fact, that could spell disaster, especially if an item or asset is inadvertently forgotten, or, more likely, after acquired.  That’s why every Will should include a “residuary clause,” which is a plan for distribution of whatever remains after debts, expenses and taxes are paid and specific gifts are distributed. A residuary clause is often unique, but each ensures two things: (1) no assets remain undistributed; and (2) if distribution fails for lack of a living first order beneficiary, the remaining estate is distributed to an ultimate beneficiary (avoid using heirs-at-law if the client doesn’t know and approve of who that would be).  Even of the residuary, it may be necessary or desired to describe the priority for funding various shares or items to be allocated to such shares.

Describe How to Pay Debts, Expenses and Taxes, and Make Tax Elections

Of course, clients prepare a Will so that they can best preserve assets and pass them to beneficiaries at their death.  To be as intentional as possible, we want to ensure what assets or portions of the estate we desire be utilized to pay debts (including final income taxes), expenses of administration and state and federal transfer taxes (if any, keeping in mind that these are moving targets so this should never be a silent term of the Will just because the estate is not taxable if the client were to die today), and what assets are expressly last resorts to cover these.  To this end, consider those things that the beneficiaries could receive a little less of and not bat an eye at (e.g. cash, marketable stocks, etc.).  Compare the former with things that are essential to preserve and transfer in whole (e.g. a farm, a closely held business, or a primary residence that a spouse or child lives in). 

Tax elections and allocations of retirement accounts also help preserve the estate.  For example, a married person’s Will should indicate when to elect Q-TIP and when to apply remaining exemption to estate taxes, or when any of those are discretionary.  Likewise, if estate assets are distributable to persons of more than one generation younger than the client (“skip person”), then the Will should instruct how to prioritize allocation of generation-skipping transfer tax exemption to items, shares or amounts for skip persons.  Finally, the Will should explain whether retirement accounts should be funded to the residuary, and possibly whether funded more to one beneficiary thereof than another, and if so, why and how.

Appoint the Right People to Carry Out the Estate Plan

It is paramount that trusted and adept persons or institutions be appointed to carry out the estate plan in their roles as executor, trustee, advisor, trust protector, guardian, conservator, et al.  These roles come with serious responsibility and liability, so it’s important to choose wisely. Make sure those choices are clearly described in the Will.  Also, ensure that the Will describes how and by whom any of these appointees may be removed and replaced.  

Keeping in Mind the Six Essential Provisions

A properly prepared Will is specific, thorough and enduring.  At Cook Tillman Law Group, we incorporate these six essential provisions in each Will to ensure that it is fit for administration and that potential for conflict is kept to a minimum. For financial advisors, the six essential provisions are foundational points to keep in mind when discussing estate planning with your client that will help you ask open-ended questions that yield productive answers.  Your subtle understanding of how the client’s responses will be reflected in their Will avoids that you would ask too many narrow or confusing questions that make the client feel as if they are being probed and prodded or like they are being asked to draft the document themselves, which feels daunting.  As a result, you can expect that your client will be informed and relieved to prepare or update their estate plan. 

If you have a client who is ready to create or update their Will (or Trust), we are here to make that process easy and reliable. Call us today at (615) 370-2444 or visit our website to connect about a referral or schedule a consultation.