Pitfalls of Improperly Drafted Will

admin — Fri, 29 Aug 2008 13:38:01 +0000

A number of years ago, I received a call from a potential client who had the following tale to tell. The woman’s husband had died leaving a will and some assets, one of which was a 401k. The marriage was a second for her husband, who had 2 sons from his first marriage. While he was single he had changed the beneficiaries of his life insurance and 401k plan to his sons and had redone his will.

After his second marriage, the husband and his new wife bought a new home together. They asked their real estate attorney, who handled the purchase for them, to draft new wills as well. The husband listed for his attorney the assets he wanted to pass to his sons and which to his new wife. The 401k he wanted to go to his wife. Unfortunately, the attorney didn’t understand the difference between probate and non-probate assets. So when he wrote a will that specifically left the 401k to the wife, he didn’t know that the will would have no effect on this asset because the beneficiary designations on file with the custodian of the 401k plan still listed the sons from the first marriage.

When the husband died, the wife received a big shock when she was told that she had no interest in the $500,000 account. That’s because a will doesn’t automatically control the distribution of all your assets. Contract property such as life insurance, annuities and retirement accounts pass in accordance with whom you have designated on the beneficiary forms completed and filed with the life insurance and annuity companies or retirement account custodians. Other types of property pass by operation of law such as joint accounts with right of survivorship or real estate that is owned by husband and wife. When one owner dies the property automatically passes to the surviving owner. It does not matter what the will says.

That is what happened in our story. The 401k is contract property so it passed according to the beneficiary designation form on file, not by the will. The wife tried unsuccessfully to get a court order directing the funds be paid to her.

The moral of the story is that although many people think drafting a will is simple and often undertake to do it themselves or ask the attorney who did other work for them to handle this task as well, they may miss important steps that must be taken that can save a lot of heartache and money.

This example is further reason why attorneys should reconsider doing “simple wills” when requested by a client. Simple does not mean right. For more information on this post, contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com.

Redo Your Estate Plan Before You Remarry

admin — Thu, 03 Jul 2008 22:00:00 +0000

If you are getting remarried, you obviously want to celebrate, but it is also important to focus on less exciting matters like redoing your estate plan. You may have created an estate plan during your first marriage, but this time it will probably be more complicated–especially if you have children from your first marriage or more assets. The following are some pointers for ensuring your interests are taken care of when you remarry:

• Take an inventory. The first thing you and your partner should do is each take an inventory of your assets and debts and share it with the other person. Don’t forget to include life insurance policies and retirement plans in your inventories. It is important to be open and honest about money if you want to prevent bad feelings in the future.

• Decide how you want to handle finances. Once you know what you are dealing with, then you need to decide if you want to combine (or not combine) assets when you are married. For example, if one partner is selling a house and moving in with the other partner, will he or she contribute to the cost of the house? If one partner has significant debt, you may not want to combine finances or make any joint purchases. These decisions need to be made upfront so everyone is clear on what to expect.

• Decide what you want to happen when you die. You and your future spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a complicated discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property. Even if you don’t have children, there may be family heirlooms or mementos that you want to keep in your family. Again, open discussions can prevent problems in the future.

• Consult an elder law or estate planning attorney. Even if you don’t have a lot of assets, you should consult an attorney, especially if you have children. You will definitely need to update your will. You may also need to update or create other estate planning documents such as a durable power of attorney and a health care proxy. If you have significant assets, a prenuptial agreement may be appropriate. In addition, the attorney can help you decide if a trust is necessary to protect your children’s interests.

• Change your beneficiaries. You may want to change the beneficiaries on your life insurance policy, annuity, and/or retirement plan. If you are divorced, however, you may not be able to change some of the beneficiaries. Bring your divorce decree with you to the attorney so he or she can make sure you do not violate the decree. If you can’t change your beneficiaries, you may want to buy additional life insurance or retirement plans that will include your new spouse.

The most important thing to remember is to be open and honest with your future spouse and your family members about your wishes.

Fredrick P. Niemann » estate planning attorney

Pitfalls of Improperly Drafted Will

Redo Your Estate Plan Before You Remarry