One way that people often make mistakes in their estate plans, is not making sure that all the various ways that assets can transfer to other people after death have been properly coordinated.
After someone passes away, there are several different ways their assets can be passed on to another person. Some assets might have to go through probate, but other assets will be passed on automatically as a matter of law. Depending on the planning the deceased has done, assets could be passed on through the instructions in a trust.
It is important that all the different ways assets can pass down, do not contradict one another for an estate plan to be effective. A will can be created that says the contents of a bank account should be divided between three children, but that provision could be overridden, if that bank account says it should be transferred on death to only one of the children. This scenario was the subject of a recent reader question to the NWI Times in "Estate Planning: Catching up on reader's questions."
This is actually a common problem. When people open bank accounts, they make them transferable on death at the bank's urging. Then they do something different with the account, when they create their will. This leads to problems. The person who gets the bank account through the transfer on death, is under no legal obligation to heed the wishes stated in the will.
For this reason, it is important to periodically review your estate plan and all your beneficiary designations on financial accounts, to make sure that everything still matches up and works according to your wishes.
Reference: NWI Times (May 27, 2018) "Estate Planning: Catching up on reader's questions."
Comments