Tailoring a Plan to Fit Your Needs

Many clients have questions and confusion regarding which of the assets in their respective estates must go though the process of probate after their demise. Assets that are not held in a trust, held jointly with rights of survivorship or that do not have named beneficiaries must pass pursuant to a will, or under the laws of intestacy if there is no will. In other words, a person’s last will and testament applies only to those assets in the person’s name alone at the time of death.

A will must be proven to the court, or “probated.” This means that the executor named in the will must get permission from the court in order to distribute assets according to the will. Many clients do not want their wills to be subject to the probate process for various reasons, including the fact that once filed, a will becomes a matter of public record or because there is family discord and the probate process could become drawn out as a result. Further, if an individual owns real property in more than one state, probate is required in each state. This is called ancillary probate, and it can be time consuming and costly. The best way to avoid probating a will is to create a living trust to hold virtually all non-retirement assets. Probate will also be avoided if assets are held jointly with right of survivorship, or if there are named beneficiaries on all assets.

Retirement plans such as IRAs and 401ks should have named beneficiaries. If no beneficiaries are named, the assets will pass according to the terms of the person’s will or in accordance with the laws of intestacy as determined by New York State law.

For individuals with significant assets that might result in a taxable estate, it may be advisable to designate a trust as the beneficiary of a retirement asset.

Some other issues to consider when naming beneficiaries/establishing a plan are whether a person is in a second marriage and wants his/her assets to pass to the children from the first marriage. If that is the case, a living trust can be crafted to provide for his/her children, while still giving the surviving spouse a limited income or other interest. There are many other considerations to consider if a couple is separated. However, typically, in such case, each spouse should make sure not to designate the other spouse as beneficiary of any account, provided that is their wish.

When an individual reviews his/her estate or testamentary plan it is highly advisable to consult a competent attorney who can discuss the ramifications of these issues. The goal is for the plan to reflect an individual’s wishes, and to simplify the process for his/her heirs.