Estate planning, like updating a blog, is susceptible to procrastination. I’ve heard clients say many times that they should have executed their plans “thirty years ago.” In response, I usually complement them on staying alive during that time period and finally finding their way to my office. But what about those who never get their estate plan in place? Let’s take a minute to discuss about what happens when you do nothing in regard to estate planning.
Believe it or not, this is a two-part discussion, because it points to a very important estate planning distinction: “probate” vs. “non-probate” assets. Probate assets are those owned individually with no beneficiary designation attached, that is, assets that will be distributed pursuant to the terms of your Will. All assets that are not subject to probate–or don’t pass under your Will–are “non-probate.”
This entry will discuss non-probate assets, and here I have some good news! It’s highly unlikely that you’ve truly done nothing that impacts the administration of your non-probate assets. Documents you may not think of as relevant to the estate planning process are, in fact, a vital part of it. For example, if you have a retirement account, or a life insurance policy, then you have most likely executed a beneficiary designation over that account or policy. We’ll talk more about how important those beneficiary designations are in a future blog, but for now, just recognize that those beneficiary designations–even if you haven’t executed a Will–control the distribution of those assets at your death.
Similarly, if you have a joint bank account, either with a spouse, a child, or anyone else, then–subject to limited exceptions–the assets in that account will pass to the surviving owner if you predecease them.
So again, you most likely have taken steps to start your estate plan, whether you’ve realized it or not. This still leaves your probate assets unaccounted for, and it fails to ensure that your “non-probate” and “probate” assets will both reflect your intentions–not to mention tax planning and other options that you should consider.