Wills help structure the planning process

In my day-to-day practice my team spends a lot of time collaborating with estate planning attorneys and often accountants, assisting with the estate planning activity for mutual clients. In our capacity as wealth managers, we tend to maintain consistent contact with families over long periods of time, and so in the estate planning process we can offer unique understanding to both the family doing the planning and the other professionals assisting them. While I am not an attorney, and estate planning when done properly usually involves an attorney, my experience with this area of financial planning enables me to provide some helpful insights.

Estate planning can be complex if necessary, or super simple in some situations. The state of Indiana is what I would consider an estate planning friendly state, in that Indiana's rules regarding transferring property on death and small estate administration are some of the most straightforward of the many states across the country that I have worked with clients in.

Without a doubt the most common estate planning question we hear when starting a new client relationship is, "do I need a will?" The answer to this question is always, "yes, probably," but then the conversation must evolve to help the individual or family understand what a will is and how it works.

A will is a specific estate planning document used in a probate to direct the transfer of property at the death of the person who writes the will, called the testator. This document will specify the party who must conduct the business of wrapping up the financial and other affairs of the deceased individual. This person, called the personal representative or executor, will be responsible for paying expenses and settling debts, selling or re-titling property, managing the disposition of investments and ultimately distributing profits to the heirs or beneficiaries listed in the will.

A will becomes activated during a process called probate, at the death of the testator. Interestingly however, despite the advice that almost everyone should have a will, Indiana rules have made the estate process so easy to navigate that with a little foresight and planning rarely do we see an actual probate opened in our practice. The primary tools that can be used to avoid probate are an asset titling tool called Transfer on Death (TOD), beneficiary listings on retirement plans and in some situations a Living Trust.

In the State of Indiana, a transfer on death title or registration can be used on financial property such as bank accounts or investment accounts, real property such as real estate and motor vehicles and even personal property such as clothing or jewelry when executed properly. For estate planning situations when there is perhaps one or two ultimate heirs and property is free of liens, this tool can provide an efficient way of transferring property. Let's look at a hypothetical example.

Betty is a surviving spouse, her husband of many years passed five years ago. Betty's assets consist of a checking account, a savings account, a couple of CDs, her home (paid off), a paid off car, an investment account, and an IRA. She has two grown children as heirs.

Using a TOD title on her bank accounts and CDs, as well as her investment account, can efficiently transfer these assets to her children. When the bank and financial institutions are presented with proof of Betty's passing, they will require each beneficiary open an account and Betty's deposits or investments will be split into the beneficiary account according to the instructions held by the institution. The IRA will also be transferred similarly to a specific type of beneficiary IRA for each beneficiary. The process is straightforward.

Transferring real property such as real estate or vehicles is a bit more involved, and usually involves the help of an attorney. The property, however, can be transferred without establishing a probate as well, which saves time and cost.

So, if so many are avoiding probate in Indiana, then why do we typically answer affirmatively to the need for a will? We answer this way because despite the desire to simplify the estate process, not every situation ends up being simple, and a will can provide more detailed instructions in the event complications or challenges arise.

The process of engaging an attorney and drafting a will also opens up the planning dialogue, which tends to create more holistic and well-conceived planning outcomes. A will can also be vital for younger families with children, as it is the document used to designate guardianship intentions for surviving minor children.

In short, drafting a will makes us think about our estate and legacy, which is perhaps the most important component of the estate planning process.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.