Do you really need a will? It depends. But if you have a bank account, life insurance, retirement plan or any type of an investment account you do need to make sure that any beneficiary designations clearly define the person or entity where you want those assets to go upon your death.
It’s a common misunderstanding that your will determines exactly to whom your estate will go when you die. The reality is, for many people, the majority of their estate consists of insurance and retirement/investment accounts. As general rule, if you have designated a beneficiary (ex. parent, wife, child, etc.) on an account or policy, that person will receive what is left in the account regardless of what your will specifies. However, should you fail to designate a beneficiary or name “my estate” as your beneficiary, then this asset will pass according to your will (if you have one) or the laws of intestacy (if you don’t), but it will also require a court-supervised probate proceeding, which may not have been needed otherwise.
If you make a will (and we recommend you at least think about it), you’ll still need to review your beneficiary designations and plan accordingly.
For example, assume you want your three children to inherit an equal share of your estate and you sign a will to that effect. However, if child #1 is the sole-named primary beneficiary of your $1,000,000 insurance policy, then child #1 will get the $1,000,000 in these insurance proceeds AND one-third of the remainder of your estate. This will result in an inequitable distribution of the overall estate among your surviving children – and probably some hard feelings too.
If you have any questions about your beneficiary designations or estate plan, please contact us at (615) 290-5354.
