Some people make the unfortunate mistake of preparing a comprehensive estate plan but forgetting that not all of their assets will be governed by the dispositive provisions in their will or revocable trust.
For example, if real estate is co-owned with other people, the way the property is titled will govern who inherits the property upon death. For example, a house owned by husband and wife is often held in a form of title known as “By the Entirety” which means that when one predeceases the other, the property is automatically now owned by the surviving spouse as a matter of law. It doesn’t matter that the will may leave the decedent’s assets to their children instead.
Property may also be owned as “Joint Tenants with Rights of Survivorship.” This is similar to the prior example in which the joint tenant who survives the decedent will take ownership of the entire property upon the decedent’s death. Thus, if Jack and Jill who are not even married own property together as joint tenants with rights of survivorship, if Jack dies, Jill will inherit the property, not Jack’s spouse or children.
Therefore, it is important to make sure that real property is titled properly to reflect the testator’s wishes as to who should inherit the property upon their death.
Similarly, there are other types of assets that are not governed by the dispositive provisions of a will or trust. These include life insurance policies, retirement accounts, and bank accounts. These are known as transfer on death (TOD) or paid on death (POD) accounts. These assets will go to whomever is named as the beneficiary of these assets in the beneficiary designation form.
We often pay little attention to these forms when they are handed to us when we open a new account but they are immensely important and must be filled out properly if they are to mirror the dispositive provisions of a will or trust.
It is easy to see how a will or trust could be rendered irrelevant by failing to properly title or designate beneficiaries. After all, the bulk of someone’s assets are often their real property, their life insurance policies, their retirement accounts, and their bank accounts.
Make sure to revisit your beneficiary selections and make sure they are accurate and current.