Does My Will Control?

When it comes to estate planning, many people think that a will is all they need. They will have the documents prepared and execute them and then forget about their will, assuming that they and their loved ones will be protected. Unfortunately, this is not necessarily the case. It is important to understand what assets can be passed through your will and what controls the disposition of other assets. To discuss your estate plan and the role your will can play in protecting your family, you should schedule a consultation with a knowledgeable estate planning attorney.

The Limitations of Wills

Wills allow for the legal transfer of assets from the testator (the person who created the will) to the beneficiaries of the will. To affect this transfer, however, the will must be filed with the probate court for the assets to be administered. Only those assets that are considered “probate assets” will be transferred to the beneficiaries through the probate process.  Probate assets are assets that do not have beneficiary designations and are not otherwise set up by contract to pass to persons outside of probate.

Non-Probate Assets

Non-probate assets are typically transferred directly to the beneficiaries without going through the probate process. These assets are common, even for people with modest estates. Common non-probate assets include the following:

• Retirement accounts with named beneficiaries such as 401(k)s and IRAs
• Life insurance policies with named beneficiaries
• Payable-on-death or transfer-on-death financial (bank and brokerage) accounts
• Multi party financial (bank and brokerage) accounts with rights of survivorship
• Living trusts

If you have any of these assets, it is very important that you understand that by their nature, they will not pass through your will via the probate process, regardless of the terms of your will.  The beneficiary designation/ terms of the contract will trump the terms of your will, even if you executed your will after you acquired the asset.

Careful Estate Planning Is the Answer

This is one of the ways that an estate planning attorney can help. Understanding which assets can be transferred through your will and which assets do not will lead to a fairer and more balanced distribution of your assets. For example:

• Mary has three sisters: Nora, Bridget, and Sheila. In her will, she directs that her entire estate should be divided equally between each of her sisters.
• Mary later sets up a retirement account and names Nora as the beneficiary.
• Mary then takes out a life insurance policy, naming Bridget as her beneficiary.
• When Mary dies, all probate assets are divided equally between her sisters. Unfortunately, Sheila inherits far less than Nora and Bridget because the retirement account and life insurance policies are “non-probate assets.”

With careful planning, Mary could have amended her will to account for the significant inheritance Nora and Bridget would inherit outside of the will.

Having beneficiary designations or setting up accounts as multi-party accounts with rights of survivorship is not a bad thing and can be a useful tool in your estate plan.  What is important is that you understand that these assets pass outside of your will and plan accordingly.

Contact J Nichols Law, PLLC Today

Estate planning is a life-long process that goes far beyond filling out forms. To make sure your loved ones are provided for, call us today at 409-257-7878 or call us online to schedule a consultation.