The Five Assets Your Will Can't Control in Massachusetts
I meet with a lot of people who believe that once they have a will, their estate plan is complete. A will is important, but it does not avoid probate, and it doesn't control certain assets. In most cases, avoiding probate is a good thing. However, the first step is to understand what you own and how it is titled.
Why should I avoid probate?
Any asset held in your name alone, without a named beneficiary and without a co-owner, is subject to probate when you die, whether or not you have a will.
A will does not skip the process. It only tells the court how you want the process handled. That process means the court has to review your will, confirm it is valid, and issue an order officially appointing your Personal Representative, also called an Executor, before that person has the legal authority to collect your assets, pay your debts, and distribute what is left according to your wishes. It can be a lengthy process, and most families end up needing an attorney to help see it through, which can be expensive.
There are several types of assets that avoid probate because they pass according to their own rules rather than through the court. If those rules are not coordinated with your overall plan, the results can be very different from what you intended.
Here are five of the most common examples.
Jointly Owned Property
If you own real estate, a bank account, or another asset as joint tenants with rights of survivorship, it passes automatically to the surviving owner the moment you die. It does not go through probate, and your will has no say over it. This is different from owning property as tenants in common, which does go through probate. Families are sometimes surprised to learn which kind of ownership they actually have.
Retirement Accounts
401(k)s, IRAs, and similar retirement accounts pass directly to whoever is named as beneficiary on the account itself. I have seen situations where someone's will left everything to their children, but an old beneficiary designation from decades earlier still named an ex-spouse. The beneficiary form wins every time.
Life Insurance
The same is true of life insurance. The policy pays out to the named beneficiary directly, outside of probate and outside of your will. If you have not looked at your beneficiary designations in years, it is worth checking.
Transfer-on-Death and Payable-on-Death Accounts
Bank accounts can be set up as payable-on-death, and investment accounts as transfer-on-death, naming a beneficiary who receives the funds directly when you pass away. These designations bypass probate entirely and take effect immediately.
Trust Assets
Any asset properly titled in the name of a trust, rather than in your individual name, passes according to the terms of the trust, not through probate. This is one of the main reasons people use trusts: to keep assets out of the probate process altogether. However, in order to avoid probate, you need to change the name of the asset into the trust name while you are still alive. If you forget this step, then probate will be needed.
Why This Matters
In some cases, a will is never used. However, it is hard to know, and most people err on the side of caution by having a will. It is important to cover whatever is not otherwise addressed, to name a guardian for minor children, an executor, and to state your wishes. If your beneficiary designations, account titling, and trust funding are not coordinated with your will, you can end up with an estate plan that looks complete on paper but does not actually work the way you expect.
At Senior Solutions, we believe that Planning + People = Peace of Mind®. Part of doing this work right is reviewing everything and focusing on the whole picture.
Senior Solutions, Attorneys at Law, is an Estate Planning and Elder Law firm serving the Greater Boston, Massachusetts area since 2001. We are ready to help you with Medicaid Planning, Estate Planning, Probate, Guardianship & Conservatorships, Special Needs Trusts, and Fiduciary Services. We are here to help.
Please call our office at 617-489-5900 or schedule an initial consultation.
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