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Not Understanding How Your Assets Will Pass on Your Death

Many people think a Will, will control how their assets will pass when they are no longer, yet most assets today pass outside of Wills. For example, assets held in joint tenancy pass to the surviving joint tenant. If there is a surviving named beneficiary (as there are on retirement accounts, POD, TOD and life insurance plans), then those assets held as such will pass to the surviving named beneficiary. The other assets that do not have those designations pass pursuant to your Will.

Example #1: Max named his middle child as the beneficiary on his life insurance. Max’s Will left his estate equally to his three children. The middle child got all of the life insurance and 1/3 of theProbate estate. His other two children each get 1/3 of his Probate estate, but none of his life insurance.

Example #2: While still single, Jill named her sister as the beneficiary on her retirement plan at work, and her life insurance. Jill purchased her first home in joint tenancy with her sister, who shared the house with Jill. Jill later had a falling out with her sister and subsequently got married. Jill changed her Will to leave everything to her husband.

However, because Jill never changed her beneficiary designations on her retirement plan and her life insurance, and the joint tenancy on the house, the bulk of her estate passed to her sister on Jill’s death and not to Jill’s husband. An additional complication came in when Jill’s husband sued Jill’s sister to assert a spousal community property interest in Jill’s retirement and the house.

This problem can be avoided by properly using a Living Trust as the basis of your estate plan.


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