Lurking just beneath the surface of every will are the “secret” terms – those default provisions that the law helpfully inserts when the document is otherwise silent. They can undermine the best of estate plans.
These provisions are not highlighted anywhere. There is no caution light that flashes to notify you of the danger. This is just knowledge that most estate planners – and a very few other souls – have gained from years of experience and education.
Here are just a few of the provisions.
- The default survival period. A beneficiary must survive the testator (the person making the will) by at least 120 hours. That is a very short period. Most estate planners draft around this by providing a beneficiary must survive the testator by a set number of days – usually 30 or 60. This forestalls conflicts about who died first.
- The default for an asset with a debt. When a beneficiary is given property that has an associated debt, such as a mortgage, then the default is that the beneficiary must also take the obligation to pay the debt. If the testator wants to provide that the total estate, and not the beneficiary, must pay the debt, then the will must affirmatively state that as to the specific asset. This allows the testator to avoid burdening a beneficiary who may not have enough income to pay the debt on a particular asset.
- The default for payment of estate taxes. If an estate tax is due, then each person who takes a bequest by will has to pay a proportionate share. Most estate planners draft around this by stating that the tax is paid by the estate or trust before any distributions are made. While under current law few estates are large enough to incur federal estate tax, including this provision helps cushion the blow should Congress change the exemption amount or should the testator move away from Texas to a state that imposes a state estate tax.
- The default for abatement of bequests. If there are not enough assets in an estate to both pay the debts and the expenses of administration and to fund all the bequests in the will, then some bequests may not be funded. The law provides a certain order for the bequests to fall off. An estate planner can change the order by specifying which bequests should be paid first or lapse first.
- The default widow’s election. This one is tricky, so it merits a lengthier explanation. A person’s will can only dispose of what he owns. In Texas, a married person owns his separate property and a one-half share of community property. Sometimes, however, a person fails to specify in his will that he is only disposing of his property. When the will is silent, then it is interpreted as disposing of all the community property – including the surviving spouse’s share- and that means the surviving spouse is forced to make an election. She can elect to claim the one-half share of community property that she already owns, or she can elect to take what is left to her under the will and give up her share of community property. This problem is especially acute when a non-probate asset like life insurance is made payable to the probate estate. An estate planner knows to draft around this issue, so the surviving spouse is not forced to make a widow’s election.
The default provisions can sabotage your estate plan. Draft carefully.
Virginia Hammerle is president of Hammerle Finley Law Firm. She is an Accredited Estate Planner, has been Board Certified in Civil Trial Law for 25 years, and recognized as a Super Lawyer for the past 10 years. She blogs regularly on senior issues and the law and has a monthly newsletter. Contact at email@example.com.