Most people think that once they get their Wills done, they don’t have to worry about their estate plan anymore. But so much of estate planning depends on coordinating the titling and beneficiary designations of individual assets with your Will and other estate planning documents. A recent New York Times article does an excellent job of summarizing some issues that can arise:
- A Will only controls how your “probate” assets are distributed. Probate is the state’s procedure for distributing a deceased person’s property, and probate assets generally include real estate, personal property, and some bank and investment accounts. However, retirement accounts, life insurance, savings bonds, and some investment accounts generally have beneficiary designations, and regardless of what a Will says, those assets will pass to the beneficiary designated for that asset (which is usually on record with the company or other entity that administers the asset). Jointly held assets are usually non-probate assets as well, and will pass to the surviving joint owner, although this depends on state law and what type of joint ownership exists.
- Jointly owned bank accounts can produce undesired results. However, many people name a friend or family member as a co-owner of a bank account as a matter of convenience. The default on many of these accounts is for the co-owner to receive the entire account upon the death of the other, which may leave other heirs with less money than intended. A Power of Attorney can allow another person to assist with finances without ruining an estate plan.
- Your estate plan is only as good as your beneficiary designations. Many people have a large portion of their wealth in 401(k)s, IRAs, and investment accounts with beneficiary designations. However, it is easy to forget to update these designations to coordinate with your estate plan. This is why all of my clients have “homework” during the estate planning process—updating all of their beneficiary designations per my advice and instruction. It’s also why it is a good idea to check in with your estate planning attorney when life circumstances change—marriage, children, job change, buying a new home, etc. Most attorneys, including myself, will advise on these issues for a nominal charge, even if no additional estate planning work is necessary.