Common Myths About Wills & Estate Planning
Failure to Understand How Your Assets Will Pass Upon Your Death
Many people think that their Wills control how and to whom their assets pass upon their death. The reality these days is that many assets pass outside the scope of a Will.
For example, assets titled jointly with another person often pass to the surviving joint asset holder. An example is a deed to a house titled to a mother and son with right of survivorship. If the mother’s Will divides her estate equally between three children, the Will has no bearing on the transfer of the house upon her death. Her share of the house will pass to the son whose name is on the deed and the son will have no obligation to pay his siblings for the house nor will he be required to reduce his share of the mother’s estate passing to him by virtue of the provisions in her Will.
Many people have bank accounts, investment accounts, annuities or life insurance policies that have one or more designated beneficiaries. The beneficiary forms for these types of accounts will control to whom and in what amount the assets in the account pass upon the account holder’s death. In my practice it is quite common that people do not know how they’ve completed beneficiary forms for their accounts or fail to have all of their children listed on the forms. They typically complete the forms when the accounts are opened based upon circumstances that are present at the time and forget to update the forms when things change. The account owner may misunderstand the meaning of the forms and complete them incorrectly. One thing I have seen many times is someone listing a single person on the forms, the intention being that the person will distribute the owner’s assets according to the Will. This can lead to some unintended consequences, unequal distributions of assets and even adverse tax consequences.
These problems can be avoided by engaging in comprehensive estate planning that takes into consideration all of your assets. The assets should be titled and beneficiary forms completed so that a single plan is effectuated.