Who will inherit your property when you die? It’s a question each of us must face, however unpleasant. Unfortunately, many people fail to draw up a will or to update it when necessary. And many who create a will fail to understand that other arrangements might override the wishes expressed.
Even if you have a will, it does not take precedence in all circumstances. For example, if you own your home jointly with rights of survivorship, the property goes to the other owner(s) upon your death, regardless of what your will might stipulate.
Any property with a named beneficiary (such as life insurance, annuities, retirement accounts, savings accounts and savings bonds) will go to that beneficiary regardless of the terms of the will. Any property that you dispose of by contract will go to the named beneficiary.
When you have a will drawn up, it is essential that you bring to your attorney a list of all assets with named beneficiaries. Because the will cannot override these provisions, if you have changed your mind regarding the beneficiary of any asset you own, you need to update whatever documents govern the disposition of that asset accordingly. In the case of contracts signed by other parties, you will need their cooperation.
What property passes by will? Individually owned assets without a named beneficiary. If all of your property is held jointly with right of survivorship, or if there are named beneficiaries, then there might be no assets in your estate that will pass by will. However, you might still need a will.
For example, you might expect a future inheritance. You might have a lawsuit that will provide assets. You can name beneficiaries in your will for assets you expect. You can specify in your will how you want personal property to be distributed. You might want to specify guardianship arrangements for young children. Your attorney will be able to help you spell all these wishes out.
An important provision is the selection of an executor, or personal representative. The executor carries out the provisions of the will, including probate. Your attorney will be able to discuss the requirements of the executor, and advise you about the qualifications you should look for.
Probate is the legal process by which a court oversees the distribution of property left by a will. Not all wills have to go through probate. During probate, assets are identified, all debts (including estate taxes) are paid; fees for attorneys, appraisers, accountants and so forth are paid, and the remaining property is distributed according to the provisions in the will.
Probate fees can be expensive. You can reduce or eliminate probate fees by transferring property outside of probate. Some alternatives include living trusts, joint tenancy with right of survivorship, pay-on-death designations, and specifying beneficiaries outside of the will for assets such as life insurance and retirement accounts. Your attorney should be able to discuss the advantages and disadvantages associated with a living trust. State law exemptions provide options to simplify probate procedure or avoid probate completely.
There are advertisements suggesting that you can avoid legal fees by purchasing books, legal forms and/or computer programs to create your will. In my opinion, this is foolish. If any mistakes are made, the will can be disallowed, and state laws associated with intestacy will prevail. A straightforward will is not expensive, and many attorneys will not charge for an initial meeting.
An excellent resource is Plan Your Estate by attorney Denis Clifford.
Having a well-thought out estate plan is one of the best gifts you can make to your family. There is no downside in doing it early, and many potential disadvantages in procrastinating.
Elliot Raphaelson welcomes your questions and comments at email@example.com.