What exactly are “I love you” wills? It’s really just an informal term that refers to both spouses creating their wills to leave their entire estate to each other. Spouses often do this and agree that the surviving spouse will leave all assets to their children or some other heirs down the line.
Here are 5 reasons why the “I love you” wills aren’t the best estate planning:
1. Wills go through probate
Let’s use Tom and Jessica as an example of a married couple. By using these “I love you” wills, when Tom dies, the estate will have to go through probate court to get his assets to Jessica. Massachusetts probate validates the will, takes significant time (possibly 12-18 months), and incurs quite significant expenses. The content of the will also will become public knowledge, so anyone can see what Jessica inherited.
2. No asset protection
Once probate is done, Tom’s assets are distributed directly to Jessica. If Jessica has any creditors seeking money from her, they can now reach her inheritance. Also, if Jessica needs nursing home care, those assets will have to be spent in a MassHealth approved way before Jessica can be eligible for MassHealth coverage. If Tom and Jessica had wanted to pass down any inheritance to their children, that goal may not be met. If Tom had left his assets in trust for Jessica, it would be extremely difficult for creditors to ever access that money.
3. Estate taxes may increase
Massachusetts estate taxes are imposed when an estate is valued over $1 million. That means that typically when a person dies owning $1 million or less in assets, their estate pays no estate tax. However, one dollar over $1 million and estate taxes are paid on the entire amount, not just what’s over.
Let’s say Tom and Jessica each have an estate worth $600K. When Tom dies, the estate won’t have to pay estate taxes since the amount is under $1 million. But then Jessica’s estate will be worth $1.2 million, so her estate will get impacted by estate taxes when she dies. If they used an AB trust instead of wills, their overall estate could save $78K in taxes (using a 6.5% estate tax).
4. No guarantee the assets will go where intended
Perhaps Tom and Jane agreed that the surviving spouse’s assets would go to their children. Since the assets now belong to Jane, she can do whatever she wants with them. She can alter her will and change the distribution amounts and beneficiaries. If Jane remarries, she could update her will to leave everything to her new husband, so the “I love you” wills wouldn’t fulfill Tom’s wishes for distribution of assets. Trust-based estate planning allows you to retain control over how your assets get distributed.
5. No protection against guardianship or conservatorship
A will only goes into effect when you die. It doesn’t control what happens to your assets if you become incapacitated. If Jessica now has all Tom’s assets and hers, and she develops dementia, her entire estate could end up being controlled by a guardianship or conservatorship. However, if all her assets are in a trust, the person she trusted and appointed as successor trustee could manage her revocable trust for her if she became incapacitated.
As an experienced Massachusetts estate planning attorney, I can help maximize your legal strategies to protect your assets and do the best estate planning for you. Contact us today to schedule a confidential, no-cost consultation to discuss how we can help you.