Peacock Tales

Volume 17, Number 3 · July 2007

Sabotaging Your Will

by Charles C. Keller

A Will, duly probated and properly administered, is generally acknowledged to be the safest and most personal method of distributing to family members and charities your accumulated assets at life's end. This is especially true in Pennsylvania where probate costs are low and taxes are moderate, especially for immediate family members. But so often we find clients have unknowingly altered or even defeated their carefully drawn Will. We usually learn this after death when the Will is brought in for probate.

In recent estates we handled, specific gifts to grandchildren were defeated because the bank accounts intended to fund the bequests had been retitled as joint accounts with another person. By operation of law or contract with the bank, the money passed directly to the survivor and never got into the estate. The same result occurs with jointly held CDs, bonds and other securities.

There are other ways your Will — and your wishes — can be overridden by designation forms you have not understood — or have forgotten. For example, you plan to treat your three children equally. However, an insurance policy naming only two will bypass the third and after-born child — unless you remember to amend the beneficiaries in the policy.

Proceeds from a 401K retirement plan automatically go to the surviving spouse, regardless of the named beneficiaries — unless the surviving spouse files a notarized waiver. However, for the proceeds of an Individual Retirement Account (IRA), the opposite result occurs, and will go to the named beneficiary. An account opened perhaps before marriage will go after your death to the named beneficiary, regardless of the later marriage, children, etc.

Even a planned distribution from a living trust which occurs outside your testamentary estate may not coincide with your final plan for spouse and children set forth in your Will. Seldom does a living trust include all assets. Hence a Will is usually desirable in any event, especially if the trust was prepared by a non-lawyer at a "senior seminar."

Other obstructions to completion of an effective testamentary plan may arise from divorces and multiple marriages. How can you be sure a second (or third) spouse, who has the right at least to "an elective share" of your estate, will leave any of your remaining assets to your children and not to his or hers? Early consultation with your estate planning attorney and careful use of a prenuptial agreement can be extremely helpful. You cannot rely on promises alone because circumstances change. And when they do, as in a divorce, consider taking that departing spouse off life insurance policies and your Will, also as a named fiduciary, when proceedings begin.

Yet another problem may arise among siblings where the child named as agent in your power of attorney claims compensation as "wages" or "gifts." Assets intended for the estate plan may disappear or be substantially reduced prematurely. Payment for caretaking may be fair, especially if the duty is not equally shared by children. A written "caretaking agreement" may avoid disagreement or suspicion. Pennsylvania law does provide for an accounting by the agent.

So when you come to your friendly Peacock Keller attorney to plan your estate, be sure to bring the insurance policies, a careful record of how your accounts, CDs, securities, bonds, retirement programs, trusts and other assets are titled. It is important that you provide full financial information and do not overlook any assets. There is much that can be done to protect your "testamentary plan" if you act timely with full disclosure.