Keep That Asset Out of Probate!
Last month’s Hearsay discussed the importance of coordinating the beneficiary designations of your non-probate assets with the beneficiaries in your Will. Now consider what can happen if you fail to designate a beneficiary of your non-probate assets.
Your estate is liable for outstanding claims your creditors have when you pass away. If you fail to designate a beneficiary for your non-probate assets, then your investment/retirement accounts and proceeds from life insurance policies can be used to pay these claims.
Consider the following undesirable scenario:
Bob was a single father whose Will directed that his assets pass into trust for the benefit of his children. His primary asset was a two million dollar life insurance policy. He failed to designate the Trust as beneficiary of the proceeds of the life insurance policy. While driving, Bob hit a car, killing himself and the other driver instantly. The family of the other driver sued Bob’s estate for wrongful death and won.
Because Bob had failed to designate the Trust in his Will as the beneficiary of the proceeds of his life insurance policy, the two million dollars went into probate and was subject to his creditors’ outstanding claims, including the judgment from the wrongful death lawsuit. Bob’s children received a very small amount of money after the judgment from the wrongful death lawsuit was paid.
When preparing a comprehensive estate plan, a skilled estate attorney will make sure that your non-probate assets’ beneficiary designations are coordinated with the terms of your Will in order to prevent the undesirable results shown in the scenario above.
Smart estate planning lets you determine the distribution of the assets in your entire estate to protect your loved ones in the most efficient manner. If you are interested in creating or updating your estate plan, we at The Becker Law Firm would be happy to help you.