I have a spiel. It’s the spiel that I use with almost every client and usually the first thing we talk about. It forms the basic understanding of how your stuff moves after you die. If we understand that, then we can do a better job of preparing for the transfer ahead of time. Ultimately, when we talk about estate planning, that’s what we mean. Planning ahead of time (before you die) so that the legal issues will be minimized. The vast majority of legal issues involve how your stuff moves.
Good estate planning is organizing so that your assets move efficiently and in order to do that, you need to understand two things.
So, without further ado, Thing 1.
When you die, you’ll (probably) have two different types of assets: non-probate assets and probate assets. Thing 1 is non-probate assets. Non-probate assets move automatically.
How? Because there is a document somewhere that is specific to this asset and says where that asset goes next.
Now. Ready for this… the document I’m talking about isn’t a will. (Pwesch!) I heard that too. That was your mind. It was just blown.
I’ll give you a second.
A will deals with your probate assets…. that’s Thing 2. We’re talking about Thing 1.
I said you’d probably have a non-probate asset when you die. Most people do. How? Because a lot of people have a life insurance policy. When you took out that policy, what did the agent ask you?
Who gets the check when you die?
They fill out a beneficiary designation which tells the company who gets the insurance money when you die.
And when you die, (for the vast majority of policies) that person just needs to show up to an agent’s office, show some ID, show your death certificate, fill out some paperwork with the company and wait for the check.
… and (usually) pretty fast.
Things like real estate, bank accounts, retirement accounts, cars, and other things can be set up to be a non-probate asset.
Sounds pretty good, huh?
Well, like most things there can be drawbacks. For some people, those drawbacks are NBD (no big deal for you non-texters). For others, those drawbacks can be a very big deal.
You want to know about what a will does, don’t you? Like I said, that deals with probate assets. Thing 2. We’ll get to that next.
(TO BE CONTINUED)