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Will Your Assets Really Go to Your Heirs?

Update the beneficiaries in your accounts

spinner image A will document tied with a black ribbon sits on a wood desk next to a white rose and a pen.
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You may think that because you’ve drafted a will, you don’t have to worry about your possessions being divided up according to your wishes after you die. Not so. There are other precautions you must take to ensure that your wishes will be followed.

Here’s a checklist to help you make sure your estate is settled the way you want.

Get a will

The backbone of your estate is a will. It directs how you want your goods split up and can include unusual provisions, such as one stipulating an annual séance (Harry Houdini), bequeathing the second-best bed (William Shakespeare) or requesting to be buried in a Pringles can (Fredric Baur, inventor of the famed container).

If you pass away without a will, called dying intestate, your estate will be handled by a probate court and your goods distributed according to local law. Not only could this mean that your spouse gets more (or less) than you intended — it could also mean that your children don’t get as much as you intended .

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You may also wind up giving more money to lawyers and the state than you would have wanted. When you die intestate, the court appoints an executor to divvy up your goods. The probate process is time-consuming and expensive: Court fees, lawyer fees and appraisal fees can add up quickly. So, see a lawyer and get a will if you don’t already have one.

Check your beneficiaries

But that’s not all you should do, financial planners say. You should also check all your financial accounts to make sure your beneficiaries have been updated. If you’re divorced, for example, an account owned jointly by you and your ex-spouse will go directly to your ex-spouse if you haven’t changed the beneficiary on the account, no matter what your will says.

Other types of accounts can also cause problems if they aren’t titled properly. “It’s not just for IRAs,” says Mark Bass, a certified financial planner (CFP) based in Lubbock, Texas. Most financial accounts can be titled so that the money passes directly to the beneficiary, which saves probate costs. But you have to make sure your beneficiaries are up to date. Here are three ways you can title an account.

  • Payable on death. This type of account is owned by one person, who manages it and designates who gets it when he or she dies. The proceeds bypass probate and go directly to the person designated as the beneficiary. Typically, the beneficiary only needs to present a death certificate and identification to take possession of the account.
  • Joint account with rights of survivorship. This means that the account is co-owned with another person. Each person can take money out or put money in. When one owner dies, the money goes directly to the surviving owner.
  • Joint tenants in common. In this type of account, both people have access to the account — but only a designated portion. In this case, the deceased’s portion of the account passes into their estate, which is controlled by a will.

You should also have beneficiaries for your 401(k) plans and other workplace retirement plans. The spouse is automatically the beneficiary and has to sign a notarized waiver if he or she doesn’t want the money. But you should name who gets the money if your spouse predeceases you.

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Most states will let you name anyone as a the beneficiary of an IRA, however. You may not need a waiver to designate someone else as a beneficiary.

When stronger measures are needed

Sometimes a person with a will and properly titled accounts is still unable to ensure that their money goes where intended. This is not uncommon. Suppose, for example, you and your spouse arrange that the spouse gets the money when you pass, and that the remainder of the estate goes to your two children.

You pass away and your spouse gets the money, as you intended. But if he or she marries again, that money could pass into the new spouse’s hands and, potentially, go to their children rather than yours. “We see that quite a bit,” says Bass. “The surviving spouse thought the marriage was for love, but it was for money.”

One solution is a prenuptial agreement that would put your assets into a trust for your spouse’s benefit. “They can take income from the trust and have the assets protected from creditors,” Bass says. When the spouse passes away, the money will go to the trust’s beneficiaries.

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