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Keeping Your Will Updated and Naming Beneficiaries on Assets

A Last Will and Testament is an important estate planning document that contains provisions for assets and the distribution of property upon death. Unfortunately, many individuals fail to account for assets that do not pass directly under a Will. These assets may include life insurance policies, pensions, IRAs, and 401(k) or 403 plans. After the policyholder of these assets dies, the policies may distribute the benefits to their heirs at law if there is no beneficiary designation and no Last Will and Testament. Following major life events, such as marriage, divorce, change of employment, disability or death of a spouse, individuals should create or update their Last Will and Testament and their beneficiary designation forms on retirement benefits or other assets.

 

A life insurance policy is a financial instrument that pays out a sum of money either on the death of the policyholder or after a set time. A policyholder must designate a beneficiary of the policy proceeds when he or she passes away. If the individual fails to update their policy, especially following a major life event, an unintended party, such as a former spouse, may end up being the sole beneficiary. For this reason, it is best for policyholders to consistently amend and update polices to align with their wishes for the future. A policyholder may be able to name their estate as a beneficiary, to have the policy’s proceeds pass under a Last Will and Testament and divided amongst the individual’s designated beneficiaries. However, if the proceeds become part of the insured’s estate, they are not exempt from the estate’s creditors and are subject to probate.

 

Generally, if the deceased names a beneficiary for a pension, IRA or a qualified retirement plan such as a 401(k) or 403 plan, it will not be subject to probate and thus the terms of a Will do not control. Once an individual dies, the beneficiary named on the policy or IRA will be entitled to the funds remaining in the account. To access the funds, the beneficiary makes a claim and the IRA/Pension/Insurance policy makes a payment or a series of payments to that person.

 

However, complications arise when individuals fail to keep beneficiary designations up to date or fail to name a beneficiary at all. If an individual does not name a beneficiary, the funds will be payable to the estate and subject to probate for distribution. The probate process could result in delays, reducing the amount of funds received by the beneficiaries and limiting payout options. It is important that, if the individual gets married, has children, or gets divorced, he or she updates their beneficiary designations. If an individual dies without changing a plan’s designation from a former spouse, his or her ex-spouse will be entitled to its contents, even if the ex-spouses haven’t spoken in years or if the ex-spouse remarried. It is important to also update the retirement accounts if a beneficiary passes away. If a beneficiary dies before the account holder, it would be construed as if there were no beneficiary named and the account’s funds would most likely be payable to the estate and subject to probate.

 

Neglecting to update a Will, life insurance policy, and retirement accounts when major life events occur may lead to unwanted outcomes. It is important that individuals review these documents regularly to ensure that it reflects their current situation and wishes for the future. If you or a loved one needs assistance with reviewing a Will or another estate planning matter, look to the experienced New York estate planning lawyers at Hobson-Williams, P.C. The firm’s attorneys will help you establish an estate plan that is reflective of your current wishes and will help ensure your assets will pass as intended. For more information or to schedule a consultation, call contact our New York estate planning law firm at (718) 210-4744.

Voluntary Administration Proceedings for Small Estates

When a parent dies without a Will and leaves behind money (example $10,000) in a sole checking account, a proceeding would be governed by the small estate process. Not all estates require a full probate or an administration proceeding. If the deceased passed away after January 1, 2009 and has $30,000 or less in personal property, they are entitled to a voluntary administration proceeding, which is a simplified Surrogate’s Court procedure.

The small estates procedure cannot be used if the individual who passed away owned real property when he or she died. The process can be utilized if the deceased died with or without a Will or if they conveyed their property into a trust.  To start the small estates process, an Affidavit of Voluntary Administration must be filed. By filing the Affidavit of Voluntary Administration, a person is asking to be appointed as a voluntary administrator of the estate.

This individual may be nominated in the deceased’s Last Will and Testament, if one was created, or, if a Will is not available, the deceased’s closest living relative would be chosen. The individual who files the Affidavit is asking the court to allow them to collect the deceased’s assets, pay any debts, and distribute their personal property to those who have a legal right to inherit them, either in accordance with a Last Will and Testament or under the laws of intestacy if the individual died without a Will.

A Voluntary Administration proceeding is less complex than a full probate of the Will or an administration proceeding. In a Voluntary Administration proceeding, consent does not have to be given by the beneficiaries of the deceased’s estate. This helps to avoid Last Will and Testament contest, which can be a long and expensive process. Additionally, a Voluntary Administration proceeding helps to avoid litigation over the appointment of a fiduciary in a full probate or administration proceeding.

Even though a Voluntary Administration proceeding may be less complex than a full probate or administration proceeding, it is important to consult an experienced attorney to assist you in the process. The experienced attorneys at Hobson-Williams, P.C. are available to assist you with any concerns relating to Elder Law, Trusts and Estates. For more information or to schedule a consultation, contact our knowledgeable New York Elder Law attorneys at (718) 210-4744.

The Importance of a Last Will and Testament

Perhaps the most surprising fact reported following the death of musician Prince Rogers Nelson was that the celebrity died without a Last Will and Testament. As mentioned in a previous blog article, Prince’s sister Tyka Nelson filed an Emergency Petition in a Minnesota court seeking the appointment of a Special Administrator. The circumstances surrounding the celebrity’s death is not uncommon, as 55 percent of Americans do not have a will or an estate plan in place, according to LexisNexis.

Wills are an important part of estate planning to consider, even for young people. They protect the succession of assets and ensure that the intended beneficiaries are able to access those assets, according to the deceased’s wishes. To accurately reflect the wishes of an individual, a Will should be reviewed and re-drafted every decade or so or when personal circumstances change.

Some of the factors that may affect an individual’s decision to draft a Will may include a person’s medical condition and family medical history; participation in the armed forces; level of involvement in dangerous recreational activities such as alcohol and drug consumption; health and fitness habits; and desire for financial independence.

When it comes time to draft a Will, a person should list his or her assets and desired beneficiaries. It is just as important to include digital assets, such as access to photos/videos, documents and other files, passwords and sensitive accounts (such as a savings account), as it is to consider physical ones. When drafting a Will, it is important to take into consideration extenuating circumstances, such as the unexpected death of a beneficiary. An individual may name a contingent beneficiary if his or her primary beneficiary or beneficiaries predeceases him or her.

Without a Will, the fate of a person’s estate, stocks, savings and other holdings could be decided by the state. Without a Last Will and Testament to provide clear guidance for the division of estate and assets, a deceased’s loved ones may encounter stress and be forced to endure costly legal battles to settle the estate following the loss of their loved one.

When considering drafting a Last Will and Testament, it is important to contact an experienced estate lawyer who can guide you through the process and help you make informed decisions that affect both you and your loved ones. If you or a loved one needs a Last Will and Testament or other Advance Directives, contact the experienced attorneys at Hobson-Williams, P.C. at (718) 210-4744 to ensure that your property passes to those you choose and not according to the laws of intestacy.