Importance of Reviewing Your Will

Review-Your-Will
We all know that your last will and testament is supposed to distribute all of your assets to your beneficiaries as you have instructed. Correct? Read on! As important as the will is to the transfer of your assets, it does not necessarily control how all of your assets will be distributed to your beneficiaries. You are likely to have designated beneficiaries for specific assets (your home, life insurance, IRA accounts, joint bank accounts, transfer on death brokerage account, etc.) during your lifetime. Reviewing your existing will on a regular basis is very important because things change. A beneficiary may have died, a child may have divorced or you may have won the Power Ball lottery since you last reviewed your will. Just as you need to review your will on a regular basis it is also extremely important to review your beneficiary choices for these specific assets.

 

A will can only distribute “probate assets”, those assets that are in your name alone and do not have a specific beneficiary designated. “Non-probate assets” are assets that you own jointly with another individual or assets that I mentioned above where you have designated a beneficiary other than your Estate. All non-probate assets pass automatically to the joint owners or designated beneficiary without regard to your will. If you have established and funded a trust where you named an income beneficiary to receive the earnings from the trust’s assets and a remainder beneficiary to receive the assets at some future date, you have also created “non-probate property”.

Let me give you an example of what can go wrong when you use joint property as a means of distributing your estate to avoid probate. Let’s assume a widow has three children and decided to place all of her liquid assets in three separate accounts with each account being held jointly with each individual child. Her home was already held jointly with her children. Sounds like a plan. Her will leaves her entire estate to her three children equally. As time went on she decided to move to a retirement community. The purchase price of the retirement home was $200,000. She had more than enough liquid assets in her joint accounts to pay cash for the new home, so she decided to pay cash for the new home while her house was on the market for sale. She used $150,000 from child A’s joint account and $50,000 from child B’s joint account for the purchase of the retirement home and child C’s account was not touched at all. It was always her intention to replenish the joint accounts with the proceeds from the sale of her house. Soon after she moved into the new home and before her original home sold she died. Now what happened? Even though she wanted her estate to be distributed equally it did not happen. Remember a will cannot distribute non-probate property. Both child A and child B received less than child C even though mom wanted all three of her children to share her estate equally.

Had someone pointed out the pitfalls of using a beneficiary designation as a means of distributing one’s estate this situation would never have happened. This was a real life example and unfortunately, child C refused to equalize the distribution among his siblings.

In summary when regularly reviewing your estate planning documents you must at the same time review your beneficiary designations to be sure your plan is synchronized.

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About Ira Brower

I have been in the financial service industry for more than 40 years primarily providing wealth management solutions for retired and soon-to-be retired individuals. I am President and Founder of Garden State Trust Company. Our clients depend on us for elder care solutions, such as; trust and estate planning, investment services, and lifestyle management. We also administer to “special needs” or “supplemental needs” trusts. www.gstrustco.com

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