Most people have a general understanding of what a will is: a way to designate who will get which of your assets when you die. Many think the will is the principal governing document in your estate plan, but that’s not entirely true. Many assets don’t fall under a will or probate, and without considering those things, even the best will can be almost meaningless.
Most people have accumulated real estate, have life insurance, have mutual funds (as part of or separate from a 401k or IRA), bank accounts, real estate, and other assets. In most or all of these cases, when you purchase the asset or sign a life insurance contract, you’re asked to designate a beneficiary, and sometimes a contingent beneficiary.
One of the biggest estate-planning mistakes people make is not reviewing these other financial instruments and aligning the beneficiaries they have designated with their total financial plan, or not keeping the beneficiaries current, especially in the case of a divorce or other change in life circumstances.
This isn’t to say you shouldn’t have a will; there are still assets that fall under probate, including your checking accounts, brokerage accounts, other accounts held in your name only, personal property, automobiles, jewelry, family heirlooms and things of that nature. You don’t want to die intestate, because then state law will determine how the estate is divided, and it will be divided mechanically.
A little thought when setting up your accounts can yield big benefits for your family. Some elderly people add their children as signers on their checking and savings accounts, because then the children can help with paying bills and keeping track of finances. But this can be very dangerous, because, if not done correctly, that child will inherit that money when you die, which can cause hurt feelings and disputes among the other heirs. The proper way to do it is to use a special-purpose power of attorney, so that the adult child can sign on the account but is not necessarily the sole beneficiary. Maybe you do want that child to inherit that money, but if you don’t, and don’t designate it properly, that property would be solely theirs.
While it’s important to know what falls under probate and what doesn’t, it’s equally crucial to identify all of your assets before you ask a lawyer to draw up or revise your will. At Coral Gables Trust Company, we sit down with clients — including clients whose wills are out of date — and help them create a personal balance sheet. It’s better to identify all of your assets in advance, because you will then have a clear understanding of which of your beneficiaries are already designated to receive certain assets. When you’re sitting in the lawyer’s office, the meter’s running! It can become very costly if you don’t have all of that information in an organized way.
We also help clients make sure the beneficiaries on all of their non-probate assets are correct, up to date, and relate to each other in a harmonious way. If not, there can be a great deal of family unhappiness, or, even worse, costly litigation.
If you’ve lived a good life and nurtured your relationships, your family will understandably be sad — even devastated — when you have passed away. The object of good estate planning is to minimize their unhappiness, hurt feelings, and, most of all, strife, and to pass your estate to those whom you wish to benefit.