A will is a document of last resort to transfer assets. There are many ways to transfer assets that would preempt the terms of a will. AARP’s recent article entitled “The Legal Limits of Your Will” provides a list of some major assets left outside of a will that often fall outside a will’s scope, along with tips for getting them to the people or organizations you want. Beck & Lenox Estate Planning and Elder Law reviews the benefits, as well as the pitfalls, of choosing to keep some assets out of a will.
Retirement accounts. Those named as beneficiaries will get those assets, no matter what the will says. That’s because a beneficiary designation already informed the plan administrator how to handle the asset after your death. There’s no need for probate court involvement.
Life insurance policies. A life insurance policy’s beneficiary listing, not the will, determines who gets the proceeds. Some states make an exception to that when an ex-spouse was not taken off the beneficiary designation on a life insurance policy. The states assume the deceased person did not intend to keep the ex-spouse as the beneficiary and therefore, does not allow the ex-spouse to benefit.
Bank accounts. If an account is titled as transfer on death (TOD), payable on death (POD) or joint tenancy with right of survivorship (JTWROS), those designations generally override the will. The account’s signature card would show if any of these designations applies. Ask the bank to look up your card if you aren’t sure. For individual accounts titled TOD or POD, the beneficiary can go to the bank with a death certificate (or death certificates) and proof of identity to transfer or collect the funds. JTWROS accounts become the property of the surviving account holder, who will need to show the bank a death certificate for the other account holder. See here for one caution about PODs and TODs. If the person named as the POD or TOD on an asset dies, and the owner of that asset delays selecting a new POD or TOD and that owner passes away, the asset ends up in Probate.
Real estate. If two spouses own a home jointly with right of survivorship or as tenants by the entirety, the property automatically is transferred to the remaining spouse without a court’s involvement. Real estate can also be transferred outside a will in certain states through a TOD deed, in which you name the beneficiary on the property.
Trusts. Any asset in a trust isn’t governed by a will. Therefore, trusts are another tool for distributing assets outside of probate court. However, after a trust is created, you must retitle accounts, change beneficiaries, or take other measures so that each asset you want to put into the trust will actually end up there. Beck & Lenox tries to emphasize with their trust clients how important the retitling task is, in order to protect those assets.
Reference: AARP (September 29, 2022) “The Legal Limits of Your Will”