What a Will, Will and Will Not Do
Sound confusing? Many Americans are confused by what can and what cannot pass by their will. Many also assume that a will takes care of everything.
There are several situations in which a will does not control the transfer of an asset. Disposition of property may be determined by state law, federal law or a private contract, depending on the form of ownership of an asset. For example, IRA assets pass to heirs via beneficiary designation forms, not a will.
Regardless of how perfect and well drafted a last will and testament may be, the terms of your will do not override the terms of your insurance policies, IRA or 401(k) custodial agreement.
It is critical to make sure all beneficiary designation forms are up to date. If you made a beneficiary designation mistake, it could be too late to fix it – some errors cannot be corrected. Do a beneficiary review at least once per year and any time a life changing event occurs such as a birth, death, marriage, divorce or other event that impacts your assets.
Here are just a few common assets that do not pass through a will:
- Pension Plan
- Life Insurance Policy
- Joint Tenancy Property
- POD Account
- Totten Trust
- Community Property with Right of Survivorship