What a Will Can't Do for You

Mistakes are the portals of discovery. - James Joyce

The quote above assumes that you have the luxury to learn from your mistakes and, thus, avoid them in the future. This quote is less profound, however, when it comes to wills since it is usually too late (for you at least) to learn the limitations of your will after you are dead.

It is safe to say that the things a will can't do for you far outweigh the things it can do. For example, a will can't make you more beautiful or enhance any body parts. A will also, alas, cannot bring you back from the dead (except maybe if you are cryogenically frozen, and even then the chances are still pretty slim). Nevertheless, a will is still a highly recommended part of any complete estate plan.

There are, however, a number of real misconceptions about wills that people may not normally consider. The biggest one, perhaps, is that a will can suddenly make you richer. This may sound crazy at first, but many people assume that just because they have assets and make out a will, their wishes will automatically be carried out. This just isn't so.

Basically, the power of what your will can accomplish is only as good as the amount of financial backing contained in the estate. As the example below illustrates, many typical will provisions lose their punch without any financial support.

Example Papa Warbucks, a high-ranking Enron executive, was an extremely wealthy man that generously provided for those around him. His last will and testament mirrored this generosity and provided amply for those he would leave behind after his death. Unfortunately, much of his wealth was in Enron stock and, when its value plummeted, he dropped dead from shock. After estate administration costs, probate costs, settling a considerable amount of debts, and paying off an Enron shareholder lawsuit against him, the estate was left owing money. Meanwhile, Mrs. Warbucks, Papa's wife and former personal assistant, disappeared with all the liquid assets and jewelry she could get her hands on. Coincidentally, the pool boy was never seen again either. As a result of this turn of events, the following also occurred: Papa's planned lavish funeral arrangements were replaced by a pauper's cremation. Little Anna, Papa's adopted daughter, became a ward of the state and was sent to an orphanage (again) because nobody (including family friends Mr. Am and The Asp) wanted to take care of her without support money. Little Anna's mutt dog Sandy was sent to a dog pound and a one-way trip to doggie heaven. Punjab, Papa's faithful man-servant, was unable to receive the generous bequest he would have gotten under Papa's will for his life-long service. Instead, Punjab had to make do with the $500,000 he embezzled from Papa over the years and the Enron stock he sold off in time thanks to insider training. The continued funding for Miss Asthma's Home for Orphans dried up, forcing the orphanage to close and its occupants to double up in an even worse establishment (which also later closed after it was featured on a famous news docu-drama on orphanage overcrowding).

The powers of a will are also limited as follows:

A will should never be used as your one and only estate planning tool. You should always try to have assets transfer automatically at your death, for example, to avoid the costs and delays of going through probate.

At the same time, a will's provisions do not supersede transfers that occur automatically to beneficiaries named in a living trust, pay-on-death account, property held jointly with a right of survivorship, life insurance policy, or in retirement accounts like an IRA or 401(k). So, if you don't change your named beneficiaries thinking that your will has the final say on distributing these assets, think again.

A will cannot be used to cut a spouse out of a share of your estate. Under state laws, a surviving spouse is entitled to at least a portion of the estate and can choose to take an elective share instead of the amount provided for by will.

Although you can disinherit your children and other relatives, you can't prevent them from trying to contest your will, especially if the stakes are high enough. Even if they are not successful, such lawsuits are a huge drain on the estate, with the attorneys and estate administrators being the primary winners.

Although you can put some conditions on the receipt of assets from the will, the law generally doesn't favor a lot of constraints on the transfer of assets. For example, a will may not include a requirement that an heir has to commit an illegal, immoral, or other act against public policy as a condition of receipt (e.g., a scholarship fund to a school, provided it is given only to white males; an inheritance to the child that avenges the parent's murder). Courts will either invalidate the restriction or, worse, the entire section of the will.

A will is only as good as its provisions. So, if it is drafted poorly and gets invalidated, it's useless as an estate planning tool. Similarly, having a will doesn't mean much if you forget to include something important, like a provision authorizing the estate's executor to sell assets as needed and provide a stream of income from the estate to help support the deceased's family.