When approaching the drafting of a last will and testament, many people wish to specifically leave assets to certain individuals. They might want to give their home to one person, their car to another person, and a brokerage account to yet another person. For instance, Mr. Smith’s Will might read as follows: “I devise my home located at 1 Happy Lane, Wall, New Jersey, to my son Joe Doe. I devise my Buick automobile to my son Mark Doe. I devise my Wells Fargo brokerage account to my daughter Mary Doe.”
When you give someone a part of your estate through a Will, you are said to have “devised” the asset to the beneficiary. When you give a specific asset to someone in your Will (your home, your car, your brokerage account), you are said to have “specifically devised” the asset.
I am not a big fan of specifically devising assets in a Will unless there is a compelling reason to make the specific devise. There are numerous issues that can arise when you specifically devise assets in your Will.
One issue arises if the estate is subject to a death tax, such as New Jersey estate tax or inheritance tax. If Mr. Smith leaves Joe his home, Mark his car, and Mary his brokerage account, each of these assets has a different value, so each of these assets will cause a different amount of death tax to be charged against Mr. Smith’s estate.
Joe, who is getting the house, might be receiving the largest portion of the estate from a monetary perspective, but if the Will fails to address appropriately the issue of who pays the death tax, all of Mr. Smith’s children might end up paying the same share of the death tax, even though Joe received most of the estate. Putting aside the fact that an uneven distribution of the estate might—in and of itself—cause hard feeling among Mr. Smith’s children, the fact that the children who are receiving a smaller share of the estate are paying the same amount of tax could add insult to injury as far as the children are concerned.
Another problem with specifically devising assets is, the plan counts on Mr. Smith dying owning the assets he specifically devised. For instance, what if Mr. Smith doesn’t own his home at the time of his death. Let’s say that Mr. Smith lived in a nursing home (or assisted living residence) for the last two years of his life and didn’t own his home for the two years prior to his death. What does Joe, to whom Mr. Smith specifically devised his home, receive under the Will of the testator?
The short answer is, Joe isn’t going to receive the home that Mr. Smith didn’t own at the time of his death. The Will of Mr. Smith cannot control what he did not own when he died.
In fact, Joe isn’t going to receive anything under the Will based upon the specific devise of the house. The devise of the house will simply lapse, and Joe will not receive anything from this specific devise.
Now, this might cause even harder feelings among Mr. Smith’s children than the uneven division of his estate. Joe might feel that he is entitled to something from his father’s estate because his father specifically devised the house to him. The house might have been the most valuable asset in Mr. Smith’s estate.
As logical as Joe’s arguments may seem, the reality of the situation is different. Joe might end up in a fight with his siblings as he makes a losing argument for recompense from other assets Mr. Smith might have died owning. For instance, Joe might say, “I’m entitled to a larger share of dad’s bank accounts because that’s where the money from the sale of dad’s house was deposited.”
Joe will lose these arguments. Mr. Smith’s attempt to give his estate to his children in a manner he thought was appropriate based upon each child’s needs could end up causing tremendous family tension.
Detailed estate planning instructions can sometimes create more confusion than clarity when life circumstances inevitably change. Striking the right balance between guidance and flexibility may help families avoid unnecessary conflict while still honoring your intentions.