A Common Mistake in Estate Planning, and How to Avoid it

So you have finally decided to devote some time to “making a will” after having it on your “to do” list for years, or decades. After some thought, and a couple of meetings with an attorney, you are the proud new owner of a brand-new last will and testament. Time to move on to other things on the list, right?

Maybe not. Let’s say you named your two children as the beneficiaries of your will. This means that your children will be the beneficiaries of your estate, after your final expenses are paid; however, not all assets are part of your estate that is distributed according to your last will. This concept is known as your “probate estate,” and understanding it will help you avoid one of the most common mistakes in estate planning.

Your last will only controls the assets that become part of your probate estate (known as probate assets). The life insurance policy you have from before your kids were born that names your brother as the primary beneficiary? Your retirement account that only named your first born? That bank account that you converted to a joint account with your youngest? These are probably not probate assets and, if not, they will not be distributed according to your will to your two children.

When you create, or update, your last will it does not necessarily impact the distribution of all of your assets. Some things, such as life insurance, retirement accounts, and bank accounts, can have designated beneficiaries which are not  subject to  the provisions of your last will and testament. Someone who owns an account or other property with you may be entitled to receive some, or all, of that asset after you pass away.

You should contact your life insurance company, retirement account custodian, and your bank before you meet with your attorney. When you sit down to discuss your last will with your attorney, make sure to discuss the assets you own and review the designated beneficiaries. And, if you have had your coffee, ask about the tax consequences of each different asset.

Fletcher Rush is a Board Certified Specialist in wills, trusts, and estates. If you have any questions or need assistance, please feel free to contact Fletcher at (941) 552-2563 or [email protected].