Portfolio Shrunk, Now Review Your Last Will

OK, take a deep breadth. We've all taken financial hits. The DJIA closed at 12,514 on January 12, 2007 and touched an intraday low of 7982 on November 13, 2008, a loss of 36% in less than two years. In these troubled times, you have many other issues to concern yourself with but another to put on the "to do" list is review your last will. Why? Falling net worth results in specific bequests (both charitable and otherwise) eating up an increased percentage of your estate. The assets of a probate estate are paid out in a specific order: (a) administrative expenses of the estate such as attorney fees, (b) debts of the estate such as taxes, (c) specific bequests, (d) the residuary of the estate. This means a loss in value comes out of the residuary of the estate first. Let's break down an example. In 2007 when he executed his last will, Joe had a net worth of $1.5 million. Let's assume Joe's 2007 last will has specific bequests as follows:

• $50,000 to each of two sons
• 5 nieces and nephews, $10,000 each,
• Boys and Girls Club $50,000,
• remainder to wife.

If Joe dies with the same net worth as in 2007 (i.e., $1.5 million), the distributions from his estate might look like this:

• $10k for attorney fees and probate court costs,
• $100k to sons,
• $50k to nieces and nephews,
• $50k to Boys and Girls Club, and
• $1.29 million to wife.

Wife comes out fine (depending on your perspective) with $1.29 million. But checkout the effect of a 30% drop in Joe's net worth to $1.05 million due to taking a hit in the stock market.

• $10k for attorney fees and probate court costs,
• $100k to sons,
• $50k to nieces and nephews,
• $50k to Boys and Girls Club, and
• $840k to wife.

$840,000 sounds like a comfortable amount of money on the face of it but consider this might include the equity of the primary home. For argument's sake, let's say Joe's home has $400k in equity. That leaves $440k in cash for Mrs. Joe. Not in dire straights but not comfortable either. Mrs. Joe might be forced to sell the home if extraordinary expenses pop up like medical bills in the family. With this information in mind, Joe may want to reduce some or all of his specific bequests to push more assets down into the residuary of his estate for the benefit of his wife.

The MedLawPlus.com® Last Will and Testament Form is a fast and economical solutions for those wishing to draft a new will ($13.99, free trial).

Do I need a new will when I move?

This is a common question when moving from one state to another. Two points: (a) the state probate laws of the various states (Louisiana excepted) are very similar and (b) most states have an express provision accepting for probate wills created in accordance with the laws of other states. Here is a sample of state probate laws that accept wills created in other states.

• Arizona.
  
• California
  
• Colorado
  
• Florida (see section 2)
  
• Texas, couldn't find a provision in the probate code explicitly accepting wills from other states but this blog post from a Texas lawyer states that Texas probate courts give "full faith and credit" to wills from other states.
  
• Washington
  

If I did not list your state and you wish for me to give it a look, please just leave a comment. International wills are another issue. In order for a last will executed in another country to admitted into probate in the United States, your state must have passed a version of the Uniform International Wills Act (part 10 of the Uniform Probate Code) and the international will must meet the requirements of that act. Note in particular the requirement for two witnesses.

The MedLawPlus.com® Last Will and Testament Form is a fast and economical solutions for those wishing to create a simple will ($13.99, free trial).

What Happens When A Devisee Predeceases The Testator?

A common question from persons creating their own last will is what happens if one of the beneficiaries named in my last will predeceases me? The most straight forward way to address this situation is to name contingent beneficiaries who take whenever a devise predeceases you. However, most basic last wills do not name contingent beneficiaries. In the case where a devise predeceases the testator, what happens is a matter of state law. The probate codes of many states have specific statutes addressing the situation called antilapse statutes.

Florida Probate Code §732.603 Antilapse; deceased devisee; class gifts is one such statute (often referred to as "antilapse" statutes). It provides two alternate results. Under Section 732.603(a), if the devisee who died is a grandparent or lineal descendant of a grandparent of the testator, then "the descendants of the devisee * * * take per stirpes in place of the deceased devisee or beneficiary." Let's look at an example to see how that works. Larry leaves his first cousin Sam $50,000. Sam has three children. Sam dies in June of 2008 and Larry in October, 2008. What happens to the $50k? As Larry and Sam are lineal descendants of the the same grandparent, under Section 732.603(a), the $50k shall be split evenly between Sam's three children. What if Sam is Larry's unrelated hunting buddy and instead of a close cousin? Under Section 732.603(b), the devise to Sam then lapses and the $50k specific bequest to Sam goes back into the estate to be distributed with the residuary of the estate as set forth in the last will.

Here is a list of links to antilapse statutes from selected other states:

• Arizona Probate Code Section 14-2603.
  
• California Probate Code Section 21110.
  
• Illinois Probate Code Section 755 ILCS 5/4‑11.
  
• Michigan Probate Code Section 700.2603.
  
• Missouri Probate Code Section 474.460.
  
• New York Probate Code Section 3-3.3 (click on Estates, Powers & Trusts).
  
• Texas Probate Code Section 68.
  

Devise By Written List

It's an annual routine to revise my mother's will around Christmas time. What's her greatest concern? Who gets her stuff--jewelry, furniture, personal mementos, etc. It's a long list of specific directions and her wishes change continually. Do I have to draw up a new last will with witnesses and notary each year just so mom can change which granddaughter gets the duck painting hanging in the basement? Luckily, 'no' as we are residents of Missouri.

Section 2‑513 of the Uniform Probate Code allows the maker of a last will to device certain types of tangible personal property (such as clothing, furniture and other personal effects but NOT money) by separate written list not prepared with the same formalities as a standard last will. The exact language of Section 2-513 is as follows:

Whether or not the provisions relating to holographic wills apply, a will may refer to a written statement or list to dispose of items of tangible personal property not otherwise specifically disposed of by the will, other than money. To be admissible under this section as evidence of the intended disposition, the writing must be signed by the testator and must describe the items and the devisees with reasonable certainty. The writing may be referred to as one to be in existence at the time of the testator's death; it may be prepared before or after the execution of the will; it may be altered by the testator after its preparation; and it may be a writing that has no significance apart from its effect on the dispositions made by the will.

Roughly half the states including Missouri follow Uniform Probate Code Section 2‑513. Here is a survey of all US states indicating which allow for devise by separate written list. And here is a sample written list and another sample list.

These lists can be draw up before or after the last will. No witness is required; however, the testator must sign and date it. Further, the list can be amended simply by drawing up a new list and, again, having the testator sign and date it. I gave my mother an electronic copy of her device of personal property by written list so that she can alter it on her own whenever she pleases!

Holographic Wills

A holographic will is one in the testator's own handwriting that does not comply with the normal statutory requirements for a will (such as having two witnesses). Here is California's provision for holographic wills:

A will that does not comply with Section 6110 is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator.

California Probate Code Section 6111. The majority of states recognize holographic wills; however, a minority including Florida do not. See whether your state accepts holographic wills.

Personally, I just don't see the point to holographic wills in the age of the internet. In bygone days, it was a way for people of modest means to make a simple declaration of intention for disposition of their assets on death. But purchasing a will online for less than $20, to my mind, is a much better solution for a simple will than attempting to write out in one's own handwriting a valid and comprehensible document. Printed forms, especially interactive online forms, stand a better chance of correctly expressing the desire of the testator than a document completely in the individual's own handwriting. Why? Without the aid of a computer program and template language, the testator attempting to draft his or her own will might encounter difficulty plainly organizing beneficiaries designations.

In these difficult financial times, one can only expect more individuals to be seeking alternatives to expending money to pay lawyers. My suggestion is to look for a legal forms company that has been in business for several years. Check the BBB for complaints. Also, look for samples of the product online before purchase.