When conducting an estate administration, it is important to keep in mind that the estate inventory only includes assets of the estate that can be probated. I discussed what “probate” means in a prior post.
Many times, according to your state laws, estate assets will go into the estate by virtue of how they are titled. For instance, assets that are in your name only are certainly your estate assets. However, other possible estate assets are titled under such terms as “tenants by entirety, joint owners, full rights of survivorship, total beneficiary designation, tenants in common”, and various other legal titles. The way an asset is titled will indicate how the law will treat the asset. It could be either an asset that can be probated as a part of your estate, or it may pass to a spouse, child, or other beneficiary upon your death.
A common non-probate asset is a life insurance policy. Obviously, the policy is on your life. If you die, where does the money go? It all depends on the listed beneficiary in the policy.
Often, if people are married, the life insurance beneficiary will be a spouse. Upon your death, the life insurance proceeds would then go to your spouse. Other times, the life insurance policy may name a child as a beneficiary. This is all fine, as long as you understand that the life insurance policy money is not a “probate asset”. The money from the policy will not go into an estate, but, instead, will be distributed to a beneficiary under the terms of the life insurance policy.
Another common example of a non-probate asset is a joint bank account. Often, people will open a bank account with a spouse or other loved one. I have had several instances in my law practice where an woman put all of her bank accounts into the names of only one or two or her children. These children were helping the mother with her finances and they needed to be on the bank account to make payments to the woman’s creditors.
The problem with this arrangement was that the mother wanted all of her bank account money to go to all of her children – not just the one or two who were helping her with her bills. However, the bank account money was not in her name alone and the children helping her were the sole takers of the money upon her death. The mother had failed to take the children’s names of her accounts so that her estate assets could be distributed pursuant to her Will.
Bank accounts and life insurance policy are common examples of situations where people do not realize that the money from both will not be a part of their estate if they are not structured correctly. Talking with an Minnesota estate planning lawyer is a must if you do not understand the intracies of the law.
Please visit flanderslawfirm.com for more information on managing the estate inventory.
