AS I WISH – A Complete Estate Plan

An estate plan is an organized plan of what you want to happen to your assets upon your passing. Having executed a Last Will does not “complete” your estate plan. It is extremely important that you understand that your estate plan is more than just your Last Will and Testament (and/or your Trust in some cases).

I cannot tell you how many times people have come in to see me, after a loved one passed away, with the decedent’s Will and said “this says I get X percentage of the estate. How come I am not getting that?” The answer is that not everything passes through your Last Will. Some things pass outside of your Will. You have to be cognitive of what is passing under your Last Will and what is not.

Assume Mom passed away and Dad has a Last Will and Testament that leaves everything equally to all three kids. However, Dad has a bank account with $90,000.00 in it and he has Son #1’s name on the account with him. Unless Son #1 is on the account as a convenience signer only, Son #1 is a co-owner of that account and the instant Dad passes away, that entire $90,000.00 is Son #1’s with no legal obligation to share with Daughter or Son #2. Now, if Dad was aware of this rule and made the conscious choice to give all of this $90,000.00 to Son #1 for whatever reason, then he has effectively carried out his estate plan of treating all his kids fairly equally but carved out a little extra for Son#1 given the circumstances. Unfortunately, there usually is not an explanation of this intent left for anyone to find so most people assume it was his intent to divide the $90,000 and the siblings demand “their share”. Here is where the fighting starts. Son #1 has no legal obligation to share this money with his siblings. He may have a moral obligation to share if he was aware that Dad did intend to divide it, but the law cannot force him to divide it up without some expression of Dad’s desire to do so. Therefore, important rules you need to know and understand:

  1. Property held jointly or in survivorship passes to the survivor outside the Last Will at least upon the first to pass away;
  2. Anything that designates a beneficiary passes outside the Last Will if the beneficiary designation is completed unless the beneficiary is “my estate”; (note: some instruments also have default distribution rules even if the beneficiary designation is left blank);
  3. Only assets in the decedent’s name alone will be distributed by The Last Will and Testament of the decedent.

These three rules are the most commonly misunderstood principles that cause a decedent to make mistakes in their estate plan that ultimately starts family fights after their passing. Many times beneficiaries are changed or names are added to accounts without thought to the entire “estate plan” and its affect upon that plan. Therefore, even when someone has left my office with all the assets set to be distributed as they desire, as time goes by, it is not uncommon for them to change a beneficiary or add someone’s name to their account which has now altered their original estate plan. This leaves open the question of whether the change, although intentionally made, was made with the intention of altering their estate plan?

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