Estate Plan Titling

| Probate & Trust


After years of putting off estate planning, you’re feeling particularly accomplished as you leave your attorney’s office with a signed Will or Trust.  Another item off the to-do list, perhaps, but if you or your attorney have not taken steps to ensure your beneficiary designations and the titling of your assets align with the language of your estate planning documents, your work isn’t done.  Simply stated, beneficiary designations and certain titling methods trump the language of a Will or a Trust.

A Will only controls the disposition of assets passing through probate.  Probate assets are those that have no joint owner or beneficiary designation.  For example, if you have a Will that leaves everything to your four children, but your best friend is still named as the beneficiary of your life insurance policy, your children are out of luck.  The proceeds of the life insurance policy will be paid directly to your friend without your children having any rights in or claim to the proceeds.

From a titling standpoint, the same unintended result often occurs.  Let’s revisit your Will that leaves everything to your four children. You love them equally and intend to treat them the same after you pass away.  But during your lifetime, your oldest child is the one that lives in closest proximity to you and to helps you with your banking affairs.  Because it’s convenient, you add your oldest child to your checking account as a joint owner.  Doing so ensures that he can write bills, access your account online and handle your day-to-day financial needs.  But when you pass away, what happens to those funds is governed by Wisconsin Statutes Section 705.04(1), which provides, in relevant part, that the remaining assets belong to the surviving owner “unless there is clear and convincing evidence of a different intention at the time the account is created.”  Absent such clear and convincing evidence, which is difficult to ascertain and establish, as a joint owner, the balance that remains in that account upon your death legally belongs to your oldest child. The language of your Will that directs that everything be divided equally between all of your children doesn’t control, and your other three children may have no legal right to the remaining funds.  In addition, because that bank account is not subject to probate, there is no obligation that your son use it to pay funeral expenses, medical debts or to satisfy any other creditors that may remain at your death.  Barring few exceptions, creditors are limited to recover from estate assets only.  Of course, your son may freely elect to “do the right thing” by using the funds to pay bills and share the balance with his siblings, but that decision is entirely up to him and often serves to strain family relationships.

The same holds true for Revocable Trusts.  If you have established a Revocable Trust during your lifetime, often with the primary objective of avoiding probate at your death, but you or your attorney have not taken steps to retitle your assets in the name of the Trust or change beneficiary designations on assets to name your Trust as beneficiary, the Trust will not automatically receive those assets at death.  A probate will likely be necessary to get those assets to your Trust and ultimately to your intended beneficiaries.  Similarly, if you have a Revocable Trust for the benefit of your four children at your death but you still have that life insurance policy naming your best friend as the beneficiary, your children will not see any of the proceeds from that policy.

As part of a comprehensive estate plan, your attorney should work with you to ensure that assets are retitled and beneficiary designations are updated, as appropriate, to coordinate with your preferences and estate planning documents.  That oftentimes requires a team approach, but until all assets have been retitled or beneficiary designations updated, the estate planning process and your goals are not fully accomplished. For further questions, please contact Bridget M. Erwin at (920) 430-1900