The majority of a person’s assets can be passed down to the next generation through their estate plan. Estate planning is certainly about more than just assets, as it can also address medical decisions and things of this nature. But a large percentage of the process revolves around deciding how assets should be transferred.
To that end, it is important to remember that there are certain assets that can skip over an estate plan and will not be governed by that plan. Below are two examples.
A payable-on-death account
First of all, someone may set up a payable-on-death account, or a bank account with a beneficiary designation. This is often called a Totten trust.
What happens is that the beneficiary named on the account takes over as the account holder when the original owner passes away. This means it skips the probate process entirely because it is no longer part of the deceased’s estate.
A life insurance policy
Life insurance policies also have beneficiary designations. The life insurance company will pay that designated beneficiary, regardless of what the estate plan says.
For instance, if there is just one beneficiary named on the designation, but the estate plan says that multiple beneficiaries should split the payout, the life insurance company is still just going to pay the one beneficiary as instructed. That person could then choose to split the money with the other beneficiaries in accordance with the estate plan, but they are not obligated to do so just because that was written in the will.
Drafting an estate plan
This shows some of the complexities involved with drafting an estate plan, especially when handling financial assets. It is important for those involved to understand exactly what legal options they have.