Debunking Common Misconceptions About Wills
One of the most common reasons clients think they do not need a will is that they do not have
enough assets. High-net-worth clients tend to be more proactive about estate planning.
However, misconceptions about wills abound, which is a big reason many Americans do not
have a will. Misunderstandings about what a will can and cannot do may also be holding a client
back from creating - and making the most of - this basic yet crucial estate planning document.
Common myth #1: Wills can be used to avoid probate.
Most clients prefer to minimize state involvement in their personal affairs. This preference can
be used to motivate them to create a will and avoid dying intestate, an outcome that leaves the
fate of their estate in the hands of the probate court and state inheritance law.
It should also be stressed that using a will alone is usually insufficient to avoid the probate
process entirely. Most states have abbreviated or "shortcut" procedures for probate estates
worth under a certain threshold set by state statute and for those estates without creditors.
However, most estates are worth more than that lower threshold amount or have creditors and,
therefore, will be subjected to the full probate estate proceedings.
It is important to note that probate is not necessarily a bad thing. It does cost money in attorney
fees and court costs and can delay distributions to beneficiaries, but it can also ensure that an
estate is administered accurately and legally.
If clients strongly prefer avoiding probate, they may be interested in strategies to circumvent the
process, such as using trusts and beneficiary designations on certain accounts and policies.
Common myth #2: A will cannot be used for tax planning.
Tax planning involves significant overlap of financial planning and estate planning.
With the federal estate, gift, and generation-skipping transfer (GST) tax exemption amount set
to decrease sharply at the start of 2026 and revert to pre-2017 levels, tax planning discussions
are taking center stage in many advisors' offices. Proposals to decrease the exemption have
some clients worried and may justify employing advanced estate planning strategies now,
ahead of the 2026 sunset.
Prior to the current era of super-high exemptions, trusts were frequently used in estate planning
to reduce or eliminate estate, gift, and GST taxes. These strategies are still generally available
today, but wills can also be used for tax planning.
Trusts can be created by an individual during their lifetime or upon their death according to the
terms of their will. The latter are known as testamentary trusts, a type of irrevocable trust
created at the willmaker's death. Unlike other trusts, testamentary trusts are subject to probate.
The estate executor sets them up once the probate court has verified the will's authenticity.
Testamentary trusts can be structured in various ways that may be utilized for estate and GST
tax planning:
- A qualified terminable interest property (QTIP) trust is established for the benefit of
the willmaker's surviving spouse. Assets transferred into a QTIP trust qualify for the
unlimited marital deduction, mitigating estate taxes due upon the first spouse's death.
However, this may only defer estate taxes owed until the second spouse passes away.
- The decedent can leave their entire estate (or a large part) to their spouse. The surviving
spouse can then disclaim or say "no, thank you" to some or all of their inheritance from
their spouse. This disclaimed portion goes into a bypass trust (which can go by many
different names such as credit shelter trust or family trust), which can benefit the
surviving spouse (and others chosen by the deceased spouse) during their lifetime but
will not be included in the surviving spouse's estate at death. This trust may be created
to use the willmaker's lifetime exclusion amount at their death instead of the unlimited
marital deduction.
- Because the GST tax exemption is separate from the lifetime estate and gift tax
exemption, clients can take advantage of it with advanced will-based planning by
creating generation-skipping trusts to allow more resources to flow to younger
beneficiaries without having to worry about additional estate taxation at each generation.
The creation of tax-saving trusts with will provisions can be quite complicated in practice, but
your clients should know that will-based estate plans have a place in tax planning.
Common myth #3: Creating a will is cheaper than creating a trust.
Creating a basic will might be cheaper than creating a basic trust, though it is not an apples-toapples comparison.
Ultimately, it comes down to how complex the document is. Trusts tend to be more complex
than wills and, therefore, are typically more expensive to prepare. However, trusts and wills can
contain similar provisions that require a comparable amount of time to research and draft
properly.
The costs of creating the plan are just one cost factor. Postdeath administration costs also need
to be factored in. Because wills are subject to probate, they may be more expensive to
administer, especially if they contain provisions ordering a testamentary trust to be created.
Cost is a consideration in every estate plan. So, the client must engage in a cost-benefit
analysis. It is also important to understand the potential costs of not having an estate plan. The
same analysis should apply when trying to reduce costs using online planning tools or cutting
corners on a plan that deserves a higher level of thought and detail. Estate planning is not an
area where it pays to save money.
We recommend that clients refrain from becoming fixated on a set price that they want their
estate plan to cost. It will be better for them in the long run to adjust price expectations based on
the size and complexity of their estate and their needs. Unless a client is truly cost-constrained,
in which case a simple, low-cost will is better than no plan at all, the budget should reflect a
client's particular circumstances and goals.
The More You Know, the Better You Can Serve
Estate planning myths are helpful for identifying areas where a client could benefit from
additional information and education. The more educated you are about estate planning, the
more you can help clients recognize gaps in their plans and offer actionable solutions.
We have only begun to scratch the surface of how estate planning intersects with financial
planning on matters like wills, trusts, probate, and taxes. Many of the issues raised in this letter
can - and do - fill entire books. To learn more about these topics and discuss specific
strategies, please get in touch.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
