Ben Franklin had it mostly right – “…nothing can be said to be certain, except death and taxes.” We’d add one more thing: people who do not plan for their eventual demise with a will and an estate plan make things harder for their heirs, according to The Reading Eagle Business Weekly “Make a will, plan for distribution of assets.”
You can pass your wealth to anyone you want, but state and/or federal taxes may be due on these transfers. The rules are also complex, and if you die without a will, the state laws of intestacy may say who gets your wealth.
Most folks make the mistake of signing their wills and life insurance policies, then putting them in files and forgetting about them. These documents and your intentions will become out-of-date. It’s not uncommon for a decedent to have been divorced for five years when they die, but the ex-spouse still inherits all of his or her assets. Why? Because the ex’s name is still in the will or is listed as the beneficiary of the life insurance policy. This happens more frequently than you might think.
Probate versus non-probate assets is one of the most misunderstood concepts in estate planning. Probate is the process that deals with proving a will's validity by filing it in court. The will names an executor who is responsible for fulfilling its terms. The estate assets are identified and valued, then given to the individuals named in the will.
There are also non-probate assets that are transferred by operation of law. They specifically include accounts with beneficiary designations like IRAs, 401(k)s, pensions, retirement accounts, life insurance, annuities, and transfer-on-death accounts. These non-probate assets supersede what’s written in the will. The beneficiary designations control them.
If you don’t have a will or you haven’t reviewed it in a while, make this a priority in 2017.
Meet with an estate planning attorney who will be able to create a plan to transfer your assets and coordinate your beneficiary designations. Think of this as a way to show your loved ones that you cared enough to plan ahead so that they are not left cleaning up an expensive and stressful legal and financial mess.
Reference: Reading (PA) Eagle Business Weekly (January 17, 2017) “Make a will, plan for distribution of assets.”