A Lack of Understanding with Wills | Massachusetts Estate Planning Attorney
A Common Misconception
Many people think a Will, will control how their assets will pass after they’re gone, yet most assets today pass outside of Wills. For example, assets held in joint tenancy pass to the surviving joint tenant. If there is a surviving named beneficiary (as there are on retirement accounts, POD, TOD and life insurance plans), then those assets held as such will pass to the surviving named beneficiary. Your other assets that do not have those designations pass pursuant to your Will.
Joe’s Will left his estate equally to his four children with each getting 25%, however, Joe named his oldest child, Todd, as the sole beneficiary on his life insurance policy. As a result, Todd got all of the life insurance and 1/4 of the Probate estate. The other three children each get 1/4 of Joe’s Probate estate, but none of his life insurance. Todd refused to share the money from the insurance policy, leading to bitterness and estrangement from his siblings. Joe had made the all too common mistake of assuming that his Will would control everything, and as a result his children were left confused and angry by his poor planning.
When she was younger and still single, Jill named her sister Mary as the beneficiary on her retirement plan at work, and her life insurance policy. Jill and Mary purchased a first home with joint tenancy; both sisters lived in and shared the house. A few years later, the sisters had a falling out and Jill got married. Subsequently Jill changed her Will to leave everything to her husband.
However, because Jill never changed her beneficiary designations on her retirement plan or on her life insurance, or the joint tenancy on the house she and her sister had purchased; the bulk of her estate passed to Mary on Jill's death and not to Jill's husband. An additional complication came in when Jill's husband sued Jill's sister to assert a spousal community property interest in Jill's retirement and the house.
These problems, and many others, can be avoided by properly using a Living Trust as the basis of your estate plan. Aside from the greater control a Living Trust provides, greater privacy, more flexibility and it is harder to challenge since it avoids the ordeal of probate. While a Living Trust may not be the best solution to every estate planning problem, it is a wonderful tool to have at hand. As always, we recommend consulting an estate planning professional when drafting your estate plan and documents. We also highly recommend updating these documents at least every three years to make sure that your assets will be going to the right people in the right amounts.
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