You know you need a will, right? Most people, whether they have a will or not, know the importance of having a will. You also know you need to sign it for it to be a legal document in the state where you live. Unfortunately, most people stop at the point of signing their will and believe their estate plan is complete. Did you know there are assets you likely have that your will does not control?
Here are 3 assets your will does not control at your passing:
1. Retirement Plans: Do you remember signing up for your employer's retirement plan? You may recall filling out a couple forms or signing a payroll deduction form for how much you wanted to contribute. Do you remember signing a beneficiary form? Any employer retirement plan such as a 401k, 403b, Simple IRA...etc requires you to choose a beneficiary to receive the balance of your retirement account at your passing. This beneficiary designation acts independently of your will. You can state in your will you want everything to go to your children, but if you name a charity as beneficiary in your retirement plan, then the charity will receive the money in your retirement plan, not your children. This is true for any asset requiring you to name a beneficiary. Other examples include life insurance policies, annuities, IRAs, and Roth IRAs.
2. Assets Owned Jointly: There are three types of joint ownership your will does not control. They are Joint with Rights of Survivorship (JTWROS), Joint Tenants in Common, and Joint Tenants by the Entirety. These types of joint ownership are known as "concurrent ownership" or ownership by two or more people. The idea is when one person passes away, ownership automatically transfers to the other person. This is a common type of asset ownership for married couples. I'll focus primarily on ownership of Joint with Rights of Survivorship as it is the most common.
When you own an asset as Joint with Rights of Survivorship with your spouse, each spouse has the right to sole ownership of the property when the first spouse passes away. According to this type of ownership, when one spouse passes away, ownership of the entire property automatically transfers to the other spouse. This is all done outside of your will. For example, if you owned your home with your spouse as Joint with Rights of Survivorship, then at your passing, your spouse will automatically own the entire home. In another example, if you are single and own your home as Joint with Rights of Survivorship with a sibling, if you passed away, your sibling would then own the entire property.
3. Assets owned in a Trust: If you have a trust and you have transferred ownership of an asset to the trust, then your will does not control the passing of that asset. For example, you may establish a Joint Revocable Living Trust with your spouse and transfer ownership of your home to the trust. In this example, the trust owns the home and your will does not govern any assets owned by a trust. In the Joint Revocable Trust, you name beneficiaries to receive the trust assets at your passing, so the trust document naming the beneficiaries would govern how your home owned by the trust would pass, not your will.
A will is still your most important estate planning document and if you don't have one, a will should be the first document you should establish. When establishing your will, it is good to keep in mind, not all your assets may pass according to what your state in your will. It is important to be aware of who you have named to receive assets via your beneficiary designation in retirement plans and life insurance as well as any beneficiaries you have named in any trust you may have established.
Now is a great time to remind yourself of who you have named as beneficiaries in your retirement plans and life insurance to make sure who you have named still works well in your overall estate plan. The Planned Giving Office at One Mission Society is here to help. Give us a call and we'll walk you through this process to make sure all your assets pass according to your desired wishes.