When most people get a Last Will and Testament, they tend to believe that that document is the end-all, be-all of inheritance, but that is not always the case. How certain assets are titled greatly impacts how that asset is inherited once a person passes away.
For ease of understanding, let’s play out a scenario. A mom, Martha, who is a widow, wants to give her estate equally to her son, Sam, and her daughter, Dorothy. She has a Will that states that everything in her estate will pass equally to her two children, Sam and Dorothy. However, there are other issues, outlined below, which don’t allow that provision to truly take effect.
Insurance Policies – Designated Beneficiaries
This situation is probably the most readily thought of. If a person has an insurance policy with a named beneficiary, the benefits of that insurance policy go to the benefit of that named beneficiary. So, if Martha had a life insurance policy for $50,000.00 and she only named Sam as the beneficiary, Dorothy would not see a cent of that $50,000.00, regardless of what the Will says. This can also become more frustrating for Dorothy, because the insurance company will probably not speak to Dorothy or give her any advice or information about the policy because of privacy concerns. In addition to insurance policies, this can also apply to retirement accounts, investment accounts, mutual funds, and other financial vehicles that have beneficiary designations.
Bank Accounts – Joint Accounts and Transfer-on-Death Accounts
This is the situation that catches most heirs off guard. Section 655.79 of the Florida Statutes provides that, unless there is proof of fraud or undue influence or convincing proof of contrary intent, the ownership of any account in two or more names will transfer to the survivor when one person dies. So, if Martha put Dorothy on her checking account jointly so that Dorothy could help Martha handle paying her bills, Dorothy would become the owner of that account when Martha dies, regardless of what the Will says, unless there is proof of fraud or undue influence, or clear and convincing proof that Martha intended that the account’s ownership be governed by the Will provisions.
Bank Accounts – Transfer-on-Death Accounts
Transfer-on-death (TOD) accounts, also known as pay-on-death (POD) accounts, is another concept that similarly catches heirs off guard. Similar to the policies that hold beneficiary designations, a transfer-on-death bank account transfers ownership of the account to a designated beneficiary when the owner passes away. So, if Martha had a savings account titled “Martha, TOD Sam,” Dorothy would not have any ownership interest in that account, regardless of what the Will says.
Ownership in Real Estate
Real estate ownership is governed by the Deed that transferred ownership to the current owner. The first question is: How does the current owner hold title (As a fee simple owner? As a joint tenant with right of survivorship? As a life tenant?)? And the second question is: Is there any deed provision that governs the transfer of property upon death (A life estate deed? An enhanced life estate deed (a.k.a. a “Lady Bird Deed”)? A survivorship interest?)? These issues must be addresses on a case-by-case basis.
How to Make the Will Provisions Count
There are three main ways to make sure the above scenarios don’t happen. The first is to not name any beneficiary at all, so that the estate would become the beneficiary by default. The second option is to have the named beneficiary be the estate of the principal, meaning Martha names “Estate of Martha” as the beneficiary on her various policies and accounts. Note that not every institution will allow this kind of designation and will require a named person. The third is to have the beneficiaries mirror the Will provisions, meaning Martha names both Sam and Dorothy as 50/50 beneficiaries. This final option is the most recommended, as it is the only option that allows the asset to pass without the necessity of probate.
Boswell & Dunlap LLP has been handling estate planning and probate matters since its establishment in 1900. Should you need assistance with your own estate planning or navigating the probate of someone else’s estate, please call to set up an appointment at 863-533-7117.