Most people assume that their wills are the ultimate guide on who gets their bank or brokerage accounts after they die. But a person’s last words may not, in fact, be the last word. An estate plan can be undermined by the way an account owner names-or titles-beneficiaries to their accounts.
So your Will is just that, your Last Will and Testament. After all, this is the legal document to set it all down and get it all straight, right? Wrong.
The key to the disposition of your estate is how your assets are “titled” and how the beneficiaries are designated.
In fact, none other than the The Wall Street Journal considered this subject in a recent article titled “A Will Is Not Always the Last Word.“
Essentially, your Will is a powerful piece of legal documentation. It is oftentimes the centerpiece of an estate plan and the north star of a probate proceeding. However, for many Americans, their estate planning is a hodge podge of formal legal planning (e.g., a Last Will and Testament) and more informal planning (e.g., beneficiary designations on retirement funds or other assets outside of a Last Will).
Assets that pass “outside” of the control of a Last Will are not subject to the controls you establish in your Last Will. For example, if one of your heirs is given to “substance abuse,” then the direct, outright distributions from your retirement funds or life insurance will pass directly into his or her hands, for better or for worse.
As the original article notes and common sense validates, the careful coordination of your estate planning legal documents (i.e., Last Will and Testament, Revocable Living Trust, etc.) and the titling/beneficiary designations of your assets is fundamental to the success of your estate distribution objectives.