As last week’s post highlights, a Will is only one component of an estate plan. A proper estate plan also manages your affairs during incapacity, protects assets from creditors and divorce, provides business succession planning, and creates a lasting family legacy. Although August is “National Make-a-Will Month,” I urge all to broaden their thinking beyond just having a Will.
Of course, I don’t mean to minimize the importance of having a Will. Indeed, the statistics may shock you. More than half of Americans die without a Will. News stories abound of celebrities like Prince who died intestate, sparking years of legal battles among heirs (or those claiming to be an heir). Research shows that 73% of those who die in Texas each year die without a Will.
A Will not only addresses who inherits your assets, but it also designates an Executor to oversee the process. In Texas, if you use the term “Independent Executor,” the Executor can act free from court control, greatly simplifying the probate process.
A Will can also designate who will serve as guardian of your minor children, arguably the most important provision of an estate plan. It’s also an opportunity to make bequests to loved ones and charitable causes dear to you.
But don’t stop with just a Will. For many, the greater portion of their estate consists of retirement plans, life insurance, and assets in “pay-on-death” or “survivorship” accounts. In just 12 years since 2010, assets in workplace retirement accounts ballooned from $2.8 trillion to $6.8 trillion. These assets don’t pass under a Will. They pass according to a Beneficiary Designation. You can have a perfect Will, but if your Beneficiary Designations are out-of-date, your plans are thwarted.
Every year, we are privy to horror stories of outdated beneficiary designations. Here’s one reported by Ashlea Ebeling, “His Ex is Getting His $1 Million Retirement Account. They Broke Up in 1989.” (Wall Street Journal, June 8, 2024).
Ebeling tells the story of Jeffrey Rolison who dated Margaret Sjostedt in their early 20’s, but soon broke up. While dating Margaret, Jeffrey named her when filling out the beneficiary card for his Procter & Gamble retirement plan. Now almost 40 years later, Jeffrey’s $1.15 million retirement goes to his long-ago ex-girlfriend. Jeffrey’s only other assets are a $66,000 home, some used cars, and two cats.
Jeffrey’s two surviving brothers went to court arguing “it wasn’t fair.” Too bad, says the court. “The form is the form.” Ebeling warns: “The battle over Rolison’s money is a stark reminder that the beneficiary forms on retirement accounts, life-insurance policies, and bank accounts matter. In most cases, they trump the Will even if they were filled out decades prior.”
So as August approaches with its focus on making a Will, be sure all the other aspects of your estate plan are current—especially your beneficiary designation forms!
