I met with a client earlier this week who had a pretty straightforward estate planning need. She and her husband didn’t have any children. They owned their house. Both of them had retirement accounts. Nothing else that really raised any complex issues. We discussed the documents that would make sense for her plan.
In the course of the discussion, we talked about the interplay of her retirement accounts with her will. It seems that she had tried to get some information from a website, but was confused when the jargon got too complex. Specifically, she asked if she had beneficiary designations on her accounts, what happens to those accounts under her will.
It’s a good question and a common question at my consultations.
What is Covered by the Will?
The will distributes the property that is “subject to probate” – three words that are on everyone’s mind when they come to meet with me. Wills don’t cover joint property that has a POD (Pay On Death) designation. They also don’t distribute property with a right of survivorship designation or accounts with beneficiary designations.
If someone dies and at the time they die, they have an account with another party, that account will go to the other party without going through probate. Similarly, if the account has beneficiaries designated (retirement benefits, IRAs, annuities, securities, life insurance), that account will not go through probate. (A quick caveat, if the person’s “estate” is named as the beneficiary, then it’s going through probate).
If you want a joint account to go to the estate instead of the surviving person, you’ll need to specifically refer to the account and what you would like to do with it in the will.
The use of beneficiaries and joint accounts is one of the most common questions at my consultations. When creating your estate plan, it’s a good idea to make sure you know any and all beneficiary designations on your assets. These beneficiaries normally take precedence over your will.
If you don’t have a will yet, or if you have one that you may need to update, let's set up a Legal Strategy Session and we can review the best options for you.