If you're beginning of the process of estate planning, you may be surprised that there are a number of things that your will cannot dictate. Below are three types of property that, for the majority of cases, cannot be distributed in your will. Of course, each type of property has its exceptions, so it's important to speak with your estate planning attorney, someone like Seiler & Parker PC, for a more accurate overview of your situation.
Jointly-Owned Real Estate
As the joint owner of a piece of real estate, depending on the type of joint ownership, you may or may not have the right to pass your share of the property to your heirs. So, how can you tell whether your share can be distributed or not?
The first type of joint ownership is tenancy in common. This is the type of joint ownership that allows you to pass on your share of a property to your spouse, children, or whomever you choose. The second type of joint ownership, known as joint tenancy, usually does not allow for the passing of property shares. Why? When a property is considered a tenancy in common, each owner has a share of the property. In some cases, the shares may be equal (50/50), but in other cases, one owner may own more than the others (60/30/10). When it comes to joint tenancy property, however, each owner has an equal share of the property and cannot sell their share unless all owners want to sell the property. This means that your share of joint tenancy property can only be passed onto the other owners, but not to an heir.
Life Insurance Benefits
There's a common misconception that the deceased's spouse or adult children are automatically entitled to any payout that comes from the deceased's life insurance policy. Unfortunately, the payout of life insurance benefits isn't so clear cut.
When it comes to life insurance benefits, the beneficiary named on the policy is the one who will receive the life insurance payout, even if you name someone else in your will. A common problem that occurs is when someone sets up a life insurance policy with their spouse as beneficiary. Later, they divorce and remarry but never change the beneficiary on their policy from their ex-spouse to their current spouse. In the majority of cases, this means that the life insurance policy will be paid to the ex-spouse. Of course, there are some exceptions to this, but it's still tricky. This is why it's important that you update the beneficiary of your life insurance policy to reflect any major life changes.
Retirement accounts are one of the trickier pieces of property that may or may not be distributable, which is why you should consult with an estate planning attorney while writing up your will.
In the case of 401(k) plans, your spouse will inherit the money upon your death, even if you've named another beneficiary with your employer. The exception? Your spouse can sign a waiver consenting to your choice in beneficiary. IRAs are a bit different in that, depending on the type of state you live in, you may be able to name a beneficiary other than your spouse. For example, in a community property state, your spouse has the right to half of what you've put into the retirement account during the course of your marriage. Similar to a 401(k), you can have your spouse sign a waiver. And remember, divorce doesn't mean that your ex-spouse is no longer entitled to your benefits. They may still be entitled what you saved during the course of your marriage, so be sure to consult with an attorney to learn more.
Estate planning can certainly be tricky, which is why it's good to have an experienced estate planning attorney on your side. To learn more about estate planning and how to ensure that your loved ones are cared for upon your death, consult with an estate planning attorney today.
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