A common goal among the elderly is to save their children from going to probate when they die. On this blog we talk about several techniques to “probate protect” assets. Depending on the type of asset, probate protection can be as easy as filling out the proper paperwork to add a beneficiary to an account at the institution holding or managing the assets. However, what comes of this common practice is often an unintended result.
Consider the following recent scenario:
Mr. Campbell (not his real name), a widower, passed away owning the following assets at his death: A $1500 checking account, $26,000 Money Market, $142,000 Annuity, and an Investment Account holding $125,000 in assets.His Last Will and Testament named his son, John, as the Executor of his Estate. It also specified John and his sister, Lisa, as the sole beneficiaries with all assets to be divided equally between them. Mr. Campbell told John, in no uncertain terms, that the assets were to be split 50/50 between John and his sister. When Mr. Campbell passed away, John, as Executor, sought our advice when he suspected that a long, drawn out probate administration would be required to distribute his dad’s assets.
After some initial research on the accounts, I had the opportunity to explain to John that his father had done a great job in “probate protecting” his assets and that no administration would be required… however, I also had to explain that in the process, he ended up disinheriting John. Mr. Campbell had listed Lisa as a beneficiary on every account he had and the sole beneficiary of the Annuity contract. John was stunned.
Luckily, there was a happy ending for this family. Because the family was very close, Lisa did end up giving John his 50% of the estate, as her father intended, but she certainly was under no obligation to do so.
While things worked out in the end for the Campbell Family, all too often this type of Probate Avoidance ends up causing family battles and sibling rivalries. When planning for the distribution of your own Estate, it is important to understand that your “Last Will and Testament” does not control distribution for Joint Accounts, Payable on Death Accounts, or any asset with a beneficiary. When working towards your goal of Probate Avoidance, make sure you work with a professional elder law team to make sure you understand the implications of your beneficiary choices.
