“We’ll change our will to leave you less—or nothing at all!”
In the heat of a moment, it’s a threat some parents use to gain leverage over their kids. But in reality, with a correctly written estate plan, a will often has very little power.
Here’s why…
designated ownership > Wills
For most people, retirement savings—the money in their 401(k), 403(b), IRA, or other type of retirement account—is their biggest asset. They’ve spent much of their lives contributing to these savings vehicles, so it’s often where most of their money ends up.
These retirement accounts have a beneficiary listed on them—someone designated to receive the account after the owner dies. In that event, the account is payable to the designated beneficiary—regardless of what the deceased’s will might say.
For example, say my 401(k) lists my wife as the beneficiary, but my will says that everything goes to my kids.
Who gets the money?
My wife does—because she is the beneficiary on the account.
Real estate can also be held in a form of ownership that dictates who gets it after someone dies.
For example, I may own my house with my wife as “joint tenants with rights of survivorship.” That means if I die, the house goes to my wife.
Even if my will says my real estate should go to my kids, the “listed ownership” rules apply (just like with my 401(k)), so my wife will receive the house.
Exceptions to Designated Ownership
Now, you may be wondering…
“What about all my stuff? My tools in the garage? My furniture? The blender in the kitchen cabinet?”
These are considered personal property, and since there is no paperwork designating official ownership (like a deed or title) or a beneficiary, these items will pass via your will.
“What if my 401(k) doesn’t have a beneficiary listed?”
“What if I’m single and my house is in my name?”
In these scenarios, your will designates who gets what. But in order to fulfill the directives of the will, the estate must go through probate court. This means someone needs to provide the court with the required documents to ensure legal ownership is given to those who are named in the will.
Although you could do this yourself, most people hire an attorney who understands the probate process and knows the legal system.
Why?
Simply put, the people who work at the courthouse are not there to help you understand what to do or how the system works. They are there to process the paperwork that is presented to them. Hiring someone who knows what to do and how to do it typically saves significant time and headache.
“Is there a way to avoid the probate process?”
Yes! Using a document called a trust, you can avoid the need to probate the will.
“Another document?” You might say…
If it seems like everything is getting more complicated, and you’re tempted to forgo all the necessary paperwork in hopes that it will simplify everything… Don’t.
Ignoring your estate plan only makes things more complicated.
If you die without any estate planning, your estate is subject to the rules of intestacy. This means the probate court uses a predetermined method to divvy up your estate—and it may not be exactly what you want.
So, what’s the solution? How do you pass your estate to the people you choose with no probate court and no legal fees?
The answer is to have a thorough, tailored estate plan. Within a correctly written estate plan, you utilize beneficiaries, ownerships, and possibly a revocable trust—these can bypass not only a will, but the probate court, too.
So, next time you hear a parent threaten to write their child out of their will, you can chuckle to yourself and hope it works out for them—or suggest they update their estate plan instead.
If you’d like to review your estate plan and ensure your assets end up in the right hands, we’d be happy to help—just request a consultation below.