Have you updated your life insurance, retirement, and investment account beneficiaries lately? Did you know that most of your estate may not even be controlled by your Will? One of the biggest mistakes I see people make is that they do not realize that much of their money and assets will not be controlled by their Will. When you designate a beneficiary on assets such as life insurance, retirement accounts, annuities; those designations will override whatever you stated in your Will.
For example, if I have named my mother as the beneficiary of my life insurance, but my Will states that all of my estate should pass to my sister; my mom WILL receive my life insurance and my sister will receive other assets such as my home, car, and personal property.
Therefore, it's important to work with your attorney and financial planners to ensure your beneficiaries are up to date and worded correctly. You do NOT want to name minor children as a beneficiary on these assets even if you have a Will that creates a trust for them. Rather, you want to direct your beneficiary to your Will with the trust (or a living trust). Alternatively, if you do not have a Will, this is the perfect opportunity to see an attorney to draft this vital planning and assist you with the proper beneficiary designations.
If you don't have a beneficiary named, if the beneficiary named is your "estate," or if all the beneficiaries predecease you, then those investments will be paid to your estate and pass under your Will. Please get legal advice before naming your estate as a beneficiary for any assets so that you can fully understand the ramifications.
Certain bank and brokerage accounts will also pass outside your Will. For instance, payable-on-death accounts (sometimes called "POD" accounts) will be distributed to the named beneficiary. Additionally, accounts set up by one or more persons as joint tenants with rights of survivorship will pass to the surviving account holder or holders.
Some banks allow you to set up what they call trust accounts even though there is no written trust agreement. These types of accounts will pass to a named beneficiary without going through probate as well.
Not all joint accounts pass to the survivor. When joint accounts are set up as tenants in common, the portion of the account that was owned by the decedent passes under his or her Will.
You may find that most of your estate consists of non-probate property. Therefore, it is extremely important to coordinate the beneficiaries of all these properties to make certain your assets will be distributed as you want when you pass away.
Conclusion: A Will is not enough to ensure that your final wishes are carried out and that your loved ones are properly cared for. Therefore, make sure you seek legal advice to assist you with this vital planning, because if you don't do the planning, the state of Texas will do it for you!
