For those who consider probate (or avoiding probate) to be a significant issue, it is important to remember that probate is only a process to transfer assets. Regardless of whether probate is necessary or appropriate, the process should never become more important than the result. Specifically, the process of transferring assets should never jeopardize the answer to the following question: “Will my assets end up with the people I want to receive them?”
As I stated last column, some shortcuts to probate have a steep cost. They take away the ability to control how your assets will be distributed and place that control in someone else’s hands. One example is the parent who adds a child as a co-owner of the parent’s assets.
But there is another way in which the process of transferring assets can undermine an estate plan. This risk arises when different processes are used to transfer assets within the same estate plan.
Take the example of a surviving parent who wants her children to each receive an equal share of her estate. She has her Will drafted to provide exactly that. However, this parent also has a life insurance policy which happens to list only one of the kids as a beneficiary. When that parent passes, will the kids each receive an equal share of that parent’s estate? The answer is no. The wishes stated in the Will do not change how the life insurance proceeds will be distributed. One child will receive more than the others.
In that example, it really does not matter whether probate is necessary. Regardless, this parent’s estate plan won’t be fulfilled. The process of transferring assets, or the failure to coordinate that process, prevented the result sought by that parent.
The process of transferring assets is very important; but never more important than ensuring the result on which your estate plan was built. Find out how you can protect your estate plan.
© 2016 Steven J Wright