How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 Key Points to Remember : Only an attorney should draft a will All members of the estate planning team should know how to review a will Coordinate the will with other dispositive documents such as life insurance, retirement plans, and other employee benefit plans

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company2 Key Points to Remember (cont’d): Examine dispositive schemes to verify adequate estate liquidity exists Review the will every few years to keep it up-to- date; examine dispositive schemes in light of –tax law changes –fluctuating client needs, desires, and circumstances Be able to examine a will and spot “What’s Wrong”

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company3 A Checklist for Estate and Financial Planners Types of Will Clauses Introductory Clause Debts Clause Tax Clause Tangible Personal Property Clause Devises of Real Estate Clause Specific Bequests of Intangibles and Cash Residuary Clause Powers Clause Appointment of Fiduciaries Clause Testator’s Signing Clause Attestation Clause

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company4 Introductory (Exordium) Clause Identifies testator Establishes domicile Declares document intends: –To dispose of testator’s property at death –This document to be the last will Revokes all prior wills

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company5 Introductory (Exordium) Clause (cont’d) Example: I, Edward Grieg, a resident of and domiciled in the city of Bryn Mawr in Montgomery County, Pennsylvania, declare this to be my last will. I revoke all wills and codicils made prior to this will.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company6 Introductory (Exordium) Clause (cont’d) Planner should check: –Spelling of client’s name? Full name used? –Client also known by another name? –Is domicile correct? –Does will meet statutory requirements of domicile? –Reason not to revoke prior wills and codicils?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company7 Debts Clause States source from which each debt is to be paid Establishes as debt items that might not otherwise be considered the testator’s obligations

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company8 Debts Clause (cont’d) Example: I direct all of my debts (including any expenses of my last illness) and my funeral expenses be paid.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company9 Debts Clause (cont’d) Planner should check: –Testator rights to property held in trust of another person? Exposure to creditor claims? –Clause impact on beneficiaries? Change in debt since will drawn? Death tax impact of clause? –Effect of Equal Rights Amendment in state of domicile? –Detailed funeral arrangements in will? Consider Letter of Instruction instead. –Does “payment of debts” include mortgage on property left to specific individual?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company10 Tax Clause Establishes source for payment of: –Federal estate tax –State inheritance and estate tax –Federal or state generation-skipping transfer tax

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company11 Tax Clause (cont’d) Example: I direct that all inheritance, estate, transfer, succession, legacy and other death taxes upon property required to be included in my taxable estate whether or not passing under this Will, [except (1) transfer taxes levied pursuant to the provisions of Chapter 13 of the internal Revenue Code of 1986, relating to “generation- skipping transfers,” or any similar state law, and (2) taxes on property held in trust under the Will (or any revocable trust) of my spouse], and any interest and penalties thereon, shall be charged against and paid from my residuary estate passing under Article Fourth of Part I of this my Will.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company12 Tax Clause (cont’d) Planner should check: –State apportionment statutes? Anti-apportionment tax clause in will? –Does tax clause state who pays taxes on both probate and nonprobate property? –Coordination with tax clause in living trust? Will provision calling on trust to help estate pay taxes? –Who is responsible for paying generation-skipping taxes? –Apportionment of taxes accounting for adjusted taxable gifts made during lifetime? –Certain beneficiaries exempt from paying taxes to meet dispositive goals?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company13 Tangible Personal Property Clause Provides for who will receive personal property and on what terms Allows special dispositions among persons and organizations of the testator’s choice

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company14 Tangible Personal Property Clause (cont’d) Example 1: I give to my daughter, Eva Grieg, all of my clothing, household furnishings, jewelry, automobiles, books, pictures, and all other articles of tangible personal property owned by me at the date of my death. If my daughter, Eva Grieg, does not survive me, I give the property mentioned above in equal shares to my grandchildren, Gretta and Gail Grieg or the survivor who is alive at the date of my death. Example 2: I give the Philadelphia Museum of Art my painting of “Helga” by Andrew Wyeth.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company15 Tangible Personal Property Clause (cont’d) Planner should check: –Specific bequests of intimate items? Proper detailed descriptions? –Ademption provision if testator does not own specific property at death? –Provision for insurance proceeds covering specific bequest property? –Testator provision for cash and cash equivalents, not on deposit at a financial institution? –“As and where is” executor possession provision?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company16 Tangible Personal Property Clause (cont’d) Planner should check (cont’d): –“Personal effects” may not encompass car or items of household use, specific provisions included in will? –Residual tangible personal property clause like “all other tangible personal property” included? –Confirmation that household furnishings, silverware, etc. belong to someone else? –Avoid: Incorporation by reference Use of the term “contents”

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company17 Tangible Personal Property Clause (cont’d) General check-up of legacies: –Property left to minor, incapacitated, or disabled individual? –Are all named beneficiaries alive? Contingent beneficiaries named? –Gifts conditioned on events or circumstances that are “against public policy”? –Use of term “my issue” which may unintentionally disinherit adopted children?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company18 Tangible Personal Property Clause (cont’d) General check-up of legacies (cont’d): –Do gifts to charities meet state law requirements? Full legal (corporate) name and address? –Someone intentionally omitted? Defamatory statements in will concerning an heir? –Enough cash (estate liquidity) to cover bequests and taxes? –Verify tangible personal property clause used when residue of estate paid to trust?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company19 Devises of Real Estate Clause Specifies which real estate is to be disposed of under the will and dispose of that real estate Handles problems where the property has been sold or destroyed prior to the testator’s death

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company20 Devises of Real Estate Clause (cont’d) Example: I leave my residence located at 207 Rawles Run Lane, Bryn Mawr, Pa. to my daughter, Larissa Grieg. If at the time of my death I am no longer using the property at 207 Rawles Run Lane as my residence, then this devise is to be void and of no effect; however, if I own other real estate which I am using as my residence at that time, then, in such an event, I devise such other real estate to my daughter, Larissa Grieg. If my daughter, Larissa Grieg, does not survive me, this devise shall lapse and such real estate shall become part of my residuary estate.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company21 Specific Bequests of Intangibles & Cash Specific gifts of intangibles (property where the item itself is evidence of value), such as gifts of cash or accounts receivable

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company22 Specific Bequests of Intangibles & Cash ( cont’d) Example 1: I give 100 shares of Rohm and Haas stock to my niece, Danielle Green. Example 2: I give the sum of Five Thousand ($5,000) dollars to my sister, Sara Black, if she survives me.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company23 Specific Bequests of Intangibles & Cash (cont’d) Planner should check: –Provision made if primary beneficiary does not survive decedent? –Provisions for: Lack of ownership of stock at time of death? Stock sold but new stock purchased with proceeds? Stock split but only specified number of shares given?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company24 Residuary Clause Transfers all assets not disposed of up to this point Provides mechanism for “pouring over” assets from a will to a previously established trust (in some cases) Provides alternative disposition in case the primary beneficiary has died or the trust to receive pour-over assets is deemed invalid, revoked, or non-existent

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company25 Residuary Clause (cont’d) Example: All the rest, residue, and remainder of the property that I own at the date of my death, real and personal, tangible or intangible, regardless of where it is situated, I leave to my daughter, Larissa Grieg. But if Larissa Grieg does not survive me, then I leave the said property in equal shares to my grandchildren, Ronald Reimus and Reginald Reimus or to the survivor of them.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company26 Residuary Clause (cont’d) Planner should check: –Spousal disinheritance and state elective share statute or pre/post nuptial agreement? –Inadvertent exercise of a power of appointment? –Outright disposition to a minor or person that is legally, mentally or emotionally incompetent? Executor option to retain in trust for benefit of minor or incompetent person? –Right person named as custodian of child’s property? Back-ups named?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company27 Residuary Clause (cont’d) Planner should check (cont’d): –Default provision if pour-over trust nonexistent, revoked, or invalid? –Provision for where child’s share will go if child predeceases decedent? –Provision for children born in the future to the testator? –Marital deduction formula clause in conjunction with marital and bypass trust provisions?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company28 Residuary Clause Marital Deduction Formula Clause Often in wills of clients owning assets equal to or greater then the unified credit equivalent divides estate into two parts –marital – passes to surviving spouse as part of marital deduction and may contain an outright or trust provision –nonmarital – sets aside property exempt from federal tax and passes property to persons other than surviving spouse

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company29 Powers Clause Pertains to executor and trustee of testamentary trust established by the will Gives executor (trustee) specific power and authority over and above those provided by state law Enables executor to conserve and manage property Limits executor power where appropriate Provides authority and flexibility to continue business or manage other property with special problems Protects executor against suit by other beneficiaries by specifying powers necessary to accomplish role

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company30 Powers Clause (cont’d) Example: I authorize my executor (as well as any substitute executor) in his, her or its discretion, with respect to all property, real and personal, in addition to the powers conferred by law, to: 1.retain assets 8.assign or compromise claims 2. purchase investments 9.borrow funds 3.hold cash 10.lease, manage, develop real 4.vote and grant proxies estate 5.sell, exchange, or 11.abandon property dispose of assets 12.make certain tax 6.distribute in cash or in kind elections 7.delegate to agents 13.receive and use employee benefits

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company31 Powers Clause (cont’d) Planner should check: –Are any special powers needed to give executor flexibility to handle certain assets or problems? –Should any “boilerplate” powers be removed or modified? –Will any powers adversely affect the estate tax marital deduction? Spouse demand right that trust assets be sold or made income-producing included? Savings clause included to nullify any power, duty, or discretionary authority that might jeopardize the marital deduction? –Do powers granted cause a conflict of interest? –Specific authority for executor to make distributions in kind?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company32 Appointment of Fiduciaries Clause Names an individual or corporate fiduciary separately or together to administer the testator’s estate and any trust the will creates Gives executor appropriate power to act on behalf of the estate and carry out terms of the will Specifies if and how the executor is to be compensated

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company33 Appointment of Fiduciaries Clause (cont’d) States whether or not the executor is to post bond Specifies the authority of and decision making process for co-executors Names guardian(s) and successor(s) of any minor child of the testator

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company34 Appointment of Fiduciaries Clause (cont’d) Example: I appoint my nephew, Farnsworth Dowlrimple III, as executor under this will. If for any reason he fails to qualify or ceases to act, I appoint the Left Bank and Trust of Overflow, Pa. as my executor. I confer upon my executor all the powers enumerated in clause ___ above. No executor shall be required to furnish bond or other security in any jurisdiction. I direct that my nephew, Farnsworth, shall receive no compensation for his services as executor and that Left Bank and Trust of Overflow, PA. be entitled to be compensated for its services as executor in accordance with its regularly adopted schedule of compensation in effect and applicable at the time of the performance of such services.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company35 Appointment of Fiduciaries Clause (cont’d) Planner should check: –Does client trust the individual named as executor and successor? Is the fiduciary legally qualified to act as executor? –Should executor’s bond be waived? –Is named executor willing to serve? –Is guardian for minors suitable? Is guardian willing and able to act? –Is a prolonged estate (trust) administration anticipated? Give executor power to appoint successors?

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company36 Testator’s Signing (Testimonium) Clause Establish the document is intended to be the testator’s last will Meet statutory requirements that require testator’s signature at the logical conclusion of the will State the date on which the will was signed

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company37 Testator’s Signing Clause (cont’d) Example: In witness of the above, I subscribe my name, this 11 th day of October 2004 at Bryn Mawr, Pennsylvania to this my last will, which consists of 13 (thirteen) pages, each of which I have initialed at the bottom

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company38 Testator’s Signing Clause (cont’d) Planner should check: –Is will signed by testator at its logical end? –Is each page numbered? Is the page count correct? –Is each page initialed? –Are there duplicate or triplicate signed wills in existence? Best practice is to have only one signed original.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company39 Attestation (Witness) Clause Witnesses the testator’s signing Comply with statutory requirements Underline the testamentary character of the document Comply with state law requirements in cases where testator signed by mark or will was signed by someone else when testator physically incapable of signing, but still mentally competent

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company40 Attestation (Witness) Clause (cont’d) Example: This will was signed by Edward Grieg, the testator, and declared to be his last will in our presence. We, at his request and in his presence and in the presence of each other, state that we witnessed his signing and declaration and at his request we have signed our names as witnesses this 11 th day of October 2004.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company41 Attestation (Witness) Clause (cont’d) Planner should check: –Are there three witnesses to the testator’s signing? –Are any of the witnesses beneficiaries under the will? This is inadvisable. –Are the addresses of the witnesses stated? –Is the will self-proving? Self-proving means a notarized affidavit is attached to the will and signed by the witnesses. Only recognized in some states.

How to Review a Will Chapter 9 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company42 Other Clauses Simultaneous death (common disaster) provision Disclaimer provision Special needs provisions for minors and incompetent beneficiaries Spendthrift clause