Your Estate Plan Does Not End With a Will

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Last year I began the New Year with a column reminding readers that a Will is not the same as an Estate Plan. The thought was important enough – and still is – that I thought it worthwhile to repeat and add to it. When you chose to write a Will you have taken an important step in the direction of planning for your family and beneficiaries. It is only a first step and planning becomes more important as conditions change. Here are reasons why that is true.

Step 1. Divide Your Assets Into Those That Are Titled in Your Name Alone, Those That Are Titled Jointly, and Those That Will Go By Beneficiary Designation. Note There are Different Rules. If you think your Will has the final say in determining how your personal estate is distributed on your death look first at how your assets are titled. Then consider those that are titled only in your name, those that are titled jointly and those that will pass by beneficiary designation. The result could come as a shock although, generally speaking, if you are married and you have titled assets the traditional way, there may not be much of a difference.

For a married person, for instance, if your assets such as your house and bank and investment accounts are titled jointly with your spouse (in a category known as tenants by the entireties) those assets pass to your spouse directly on your death. If you have an IRA, 401(k), 403(b) or similar retirement asset account or if you have life insurance you have probably named your spouse as beneficiary so these assets pass without much difficulty except for the completion of forms with the respective companies by your spouse on your passing.

There are exceptions. You might have kept one or more assets or accounts only in your name. These would generally pass by Will unless they pass by beneficiary designation such as life insurance so a closer look is required.

Now, consider how assets would pass if you are a widow or widower or if you are single or divorced. In many cases your assets now are titled only in your own name. You might not have named secondary or “backup beneficiaries” which is something you could have done when your original documents were drafted. If you did not do it then it is not too late to name these “secondary” parties after the passing of your spouse or your original beneficiary. You can do this now and consider such issues as do you want your children to inherit equally from you on your passing, do you want your adult grandchildren to inherit directly with your children, do you want to name trustees for some of the funds that will pass to beneficiaries, do you want to delay inheritances so they are not received in a single lump sum, and do you also want to include charitable beneficiaries. There are decisions to be made.

Step 2. Consider the Entire Picture. Beneficiary Designations for Funds Outside the Will Matter. Today it is often likely that sizeable assets will transfer outside the Will even where there is no living or other trust at issue.

Most of the will makers I meet hold their assets either in the equity in their homes or in tax qualified funds such as IRA’s, 401(k)’s and similar or both. The beneficiary designations for these funds are critical. If the beneficiary named is your spouse, which it usually is if you are married (and for 401(k) and similar assets your spouse must give written permission to make it otherwise) then the funds do transfer to your spouse on your death. A difficulty might arise if you are single, divorced or a widowed and do not specify how you want the funds to be distributed on your passing or, even when you are married, if your spouse dies shortly before you and you have not updated your beneficiary designations. Secondary beneficiaries are needed.

Step 3. Hold Onto Your Beneficiary Designations. After you complete your beneficiary designations for assets like life insurance and tax qualified funds (IRA’s, etc.) you need to hold on to the paperwork accomplishing this in a safe place, at least as safe as where you hold your will and your beneficiaries should know where that place is. On line access might work but many financial institutions are being acquired by others and questions regarding who was named as beneficiary can easily arise.


About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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