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Katya Sverdlov Blog

Monday, June 13, 2016

Retitling Assets and Designating Proper Beneficiaries

You may have completed a Will and a Power of Attorney (all by yourself). You may think that your estate plan is in order and you can rest easily. However, you are likely less than half way done!

In general, over half of all assets in the United States pass outside of probate. These include assets that are jointly titled (i.e. real estate owned as joint tenant with right of survivorship). Those include IRAs and 401Ks and life insurance policies (that typically go to listed beneficiaries). And these include bank accounts with ‘payable upon death’ designations.  Regardless of what you have written in the Will, these assets will go directly to another person!

This may not be the result you have intended.  Below are two examples where a wrong beneficiary designation can completely change the desired plan:

Example 1: a father created a supplemental needs trust for his special needs daughter who abused drugs, to ensure that a trustee will manage her money and spend the money for her benefit, while the daughter retains her benefits and residential housing. Yet after he died, the daughter received the proceeds of his life insurance outright, because the father never changed the beneficiary designation on his policy. As a result, the daughter had access to the money and spent most of it on drugs and other dangerous pursuits, while lots of additional legal work has to be done by the family, including seeking guardianship over the daughter and losing her benefits for a few months.

Example 2: A wife owned a building together with her sister. The wife wanted to ensure that she passed her share of this building to her husband. She wrote a Will, explicitly stating that upon her death she wants her share to be transferred to the husband. However, she did not realize that she and her sister owned the property as joint tenant with rights of survivorship. When the wife died, the husband did not receive anything, because the sister became the sole owner of the building.

Simply doing a Will is not sufficient. Estate planning is a comprehensive process. All assets must be reviewed, to ensure that your plans are carried out properly.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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