Estate Planning is much more than just signing your Last Will & Testament. Many clients believe that a Will supersedes all other contracts and designations. In reality, the outcome is completely the opposite. A Will only controls “probated assets.” What exactly is a probate? In practice, the probate consists of assets not otherwise distributed or handled at your death. Essentially, they are the assets remaining in your name that do not have joint ownership or designations; a bank account that was in solely your name would be “probated” and passed down according to your Will. The following are examples of assets that pass outside of probate and are thus not controlled by your Will.
- Property held by another that is titled joint tenancy with rights of survivorship (“JTWROS”). Common examples of JTWROS assets are bank accounts and your home ownership.
- Asset directed via beneficiary designations. Insurance policies and retirement accounts (e.g. 401(k) and IRAs) that designate a beneficiary following your death will bypass probate and go directly to the individual designated.
- Accounts that contain a transfer on death (TOD) or payable on death (POD) designation. Upon your death, the person designated as the TOD or POD recipient will be directly transferred the assets contained in the account.
The temptation may arise to try and avoid probate at all costs, but there are numerous ways in which a Will ensures your intentions. For example, suppose your son or daughter passed away before you did and your intention was that he or she should give one or more assets to your grandchildren. With a JTWROS, the beneficiary of your intended assets may not receive the inheritance as you envisioned.
The Will and/or Revocable Trust are the best methods for ensuring all of your intentions, yet failure to consider assets that pass by operation of law not only causes havoc with disposition planning, but it can also invalidate your intentions and cost your family unnecessary tax. Estate planning is not only executing a Will, but coordinating distribution and ownership of all assets for consistency with the Will.
Bottom line, the estate planning process should consider all of the following: asset protection, income tax planning, estate tax planning, Medicaid planning, special family needs, and your final asset distribution goals.
Bryson Law Firm: Suwanee, Georgia. Attorney Richard Bryson has over 15 years experience with investment entities, elder law, estate planning, probate, wills and trusts, tax planning, tax dispute resolution, asset protection, personal injury, business formation, real estate transactions, and Medicaid and VA planning. Contact our Gwinnett County law firm at 404-909-8842.