Popular Misconceptions about Wills

1. Misconception #1: “I Can Avoid Probate by Having a Will” or its corollary “If I Have a Will, I’m Buying a Probate”
2. Misconception #2: “I Can Reduce or Avoid Death Taxes By Making a Will” or its corollary “Death Taxes Don’t Apply to People Who Have Wills” or its other corollary “Death Taxes Apply Only to People Who Have Wills”

Misconception #1: “I Can Avoid Probate by Having a Will” or its corollary “If I Have a Will, I’m Buying a Probate”

Whether a probate will be needed will depend on a number of facts and situations, such as:

• The nature and character of your property, and your interest in it, for example:
  • Is any of your property subject to Death Beneficiary Designation?
    • If it’s life insurance on your life, it will pass to your named beneficiary outside of probate (assuming that beneficiary is not your estate).
    • If it’s a retirement account (eg, an IRA) or an employee benefit plan (eg, a Keogh Plan), it will also pass to your named beneficiary outside of probate (assuming that beneficiary is not your estate).
    • Ditto for payable-on-death bank accounts and transfer-on-death securities.
  • Are you married and do you have any community property that is subject to a valid Community Property Agreement?  If so, it will pass outside of probate according to the terms of that Agreement.  (Caution: A popular misconception is that it must pass to the surviving spouse.  This is what most people want and what most Community Property Agreements provide, but is not required by law.  See RCW 26.16.120.)
  • How is your property titled?
    • If it’s joint tenancy property, it will pass outside of probate to the surviving joint tenants.
    • In Washington, if it’s personal property and the net value of your estate does not exceed $100,000, your personal property can pass outside of probate by Small Estate Affidavit.
    • If the property is held in trust and your interest in it is only as a beneficiary, then your interest will pass outside of probate according to the terms of the trust.
    • If your property is titled in your name and is your separate property, it may require a probate proceeding for it to pass.
  • Does your property include real property?  There are very limited situations in which real property titled in your own name can be transferred to another except through a probate proceeding:
    • One exception is if it is titled in Joint Tenancy form.
    • Another is if you are survived by a spouse and the real property is:
      • Not only community property,
      • But also subject to a valid Community Property Agreement.

    Whether or not you have a Will makes no difference here.  With the exception of the little used “SuperWill” statutes under RCW 11.11, your Will cannot:

    • Change the nature or character of your property or how it is titled.
    • Make a Beneficiary Designation, eg, for a life insurance policy, IRA, or Keogh Plan, where none exists, so that property will pass outside of probate.
    • Create a Community Property Agreement so that property will pass outside of probate.  (Query: The effect of notarized joint Wills between you and your spouse?  Could the documents taken together make one Community Property Agreement?)
    • Change your property into Joint Tenancy form so that property will pass outside of probate.
    • Create a Trust and transfer your property into it so it will pass outside of probate.
    • Transform real property into personal property so it might pass outside of probate.
• The identities of the persons to whom your property will pass, whether with or without a Will, for example:
  • Does any of your property pass to a minor child?  If so, then a probate proceeding will be required for no other reason than to appoint someone to hold the property for the benefit of the minor until he/she attains the age of majority, age 18 in Washington, or satisfies any other conditions of the gift.
    • In the absence of a Will, the transfer will require a probate proceeding for the appointment of a guardian of the estate of the minor.
    • With a Will, the transfer will also require a probate proceeding, either for the appointment of such a guardian, or a custodian under the Washington Uniform Transfers to Minors Act, or a trustee if the Will provides for the transfer to be made to a trustee.

    Whether or not you have a Will makes no difference here as regards the necessity of a probate proceeding — it only concerns the nature and identity of the person to whom the transfer will be made for the benefit of the minor.

Bottom-line:  Whether a probate will be needed will be determined by a number of factors, which do not include whether or not you have a Will.  In summary:

• 1st Question: “Whether or not you have a Will, is a probate necessary or advantageous in your circumstances?” —Only then will your Will take on meaning and purpose.
• Next Question: “If a probate is necessary or advantageous, do you have a Will?”  If so, then by having a Will, you will shift the operation and results of the probate from what state law would otherwise provide for you to what you have provided in your Will.

You don’t “avoid probate” by making a Will.  Similarly, you don’t “buy a probate” by making a Will.

The primary death tax for a Washington resident is the federal estate tax, imposed on the value of property that a Decedent owns or controls at death — how they pass to the survivors is immaterial (ie, whether by testacy, intestacy, Living Trust, Community Property Agreement, joint tenancy, etc.).

Misconception #2: “I Can Reduce or Avoid Death Taxes By Making a Will” or its corollary “Death Taxes Don’t Apply to People Who Have Wills” or its other corollary “Death Taxes Apply Only to People Who Have Wills”

Whether you and your estate will be liable for any death taxes will be determined under both federal and Washington law (see Handling Estate Tax Issues for further details).  Under both sets of law, as regards death taxes, there is no advantage or disadvantage to having, or not having, a Will.  Any death tax liability you may have will generally depend on the nature and value of your property at death, the nature of your interest in that property, and who gets what.  The particular method that you use to transfer your property to others, specifically, whether it is transferred with or without a Will, by joint tenancy, by Community Property Agreement, by trust, and so forth, does not matter for death tax purposes.

There is, however, a grain of truth to this misconception.  You can reduce or avoid death taxes with a Will — not merely because you have a Will, but because of the way that you specify in your Will (or Living Trust) for your property to pass.  Some ways can reduce and even eliminate death taxes — others can’t.

Having a Will (or Living Trust) itself does NOT by itself have anything to do with death tax liability.

Death tax liability will be determined not by “Do you have a Will?”
or
“Do you have a Living Trust?”
but, for example, by
“If you do have a Will (or Living Trust), what does it provide?”

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