Recently, three sisters visited a lawyer who had prepared a will for their mom before her death. The will incorporated their mother’s wish that her three daughters inherit equally from her estate upon her death, but two of the daughters angrily informed the attorney that they did not all receive equal amounts. They both received less than their other sister, who was very happy.
The attorney asked the sisters about what happened in the probate administration. They reported that there was no probate. So how did the money get distributed?
It turns out that the mom had gone to each of her 12 accounts and changed the titling. Initially, each account was titled just in her name with no named beneficiary, but she was told that she could make an account “payable on death” to a named beneficiary to avoid probate. So she made some accounts payable on death to one daughter, and another account to another daughter. Upon her death, each account was payable immediately just to the daughter named as the beneficiary.
Still another of her accounts was made joint with two of the daughters and another was joint with the third daughter. In both of these accounts, the funds passed to the daughter or daughters whose names were on the accounts by the rights of survivorship.
Not one of the accounts was left in Mom’s name alone. All of the assets passed outside probate, either through joint ownership or beneficiary designation.
Both the mom and the daughters made the mistake of believing that a person’s will governs how all of his or her assets will pass upon death no matter what. But the will is only effective in a probate administration. It had no power over assets that the mom made joint with one or more daughters or over assets for which the mom named a direct beneficiary.
The result was that her assets did not pass to her daughters in equal shares, as she had wanted. The daughter who inherited the largest share did not share with her sisters. The result was great family dissention, which would have deeply disappointed their mother.
To avoid this situation, consider the following tips.
1. Make a list of all your assets.
2. Consult an attorney to determine how each one would pass upon death.
3. Determine who would receive how much of each asset.
4. Make sure that when your estate is settled, that each of your family members receives what you want to give him or her.
Probate is just one legal process through which assets can pass to a new owner. Ask an attorney to coordinate your asset titling with your estate planning documents and your estate planning goals. Be sure that when your estate is settled, your family members receive what you wanted to give them.