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Having An Estate Plan

Have a Will? What could go wrong?

What do, Aretha Franklin, Michael Jackson, Abraham Lincoln, Prince, Martin Luther King, Jr. , John Denver and Sonny Bono have in common? They all died without a will. Admittedly, most of these famous people died unexpectedly. Perhaps if they had lived as long as they expected, they may have made a will. Having a will would have helped them settle things, but even with a will things can go wrong. Planning your estate not only means having the correct documents, such as a will, but also making sure everything works together to carry out your intent.

Let’s say that you have a will. Will it really accomplish what you want? Most people have the perception that the will is the document that controls the disposition of all assets. Such is not the case. A will is a document of last resort. It only operates to pass property that does not pass by some other method. For example, if you have a life insurance policy and a named beneficiary, no matter what the will says about that insurance, the beneficiary designation will control. The same is true of retirement plans and other assets for which beneficiaries have been named. Here are some examples of what might go wrong without a will and also with a will.

Example. Mary and Mike were married three years ago. Both their parents are living, and Mary and Mike have no children. Mike purchased a house in his name about a year after he and Mary married. Unfortunately, Mike died in a car accident and had no will. Mary certainly expected that she would inherit the house. Because Mike died intestate (without a will), his property passed under the North Carolina intestate law. Although Mary will receive most of Mike’s personal property, the house passes one-half to Mary and one-half to Mike’s parents. Had Mike had a will, he could have left the house to Mary.

Example 2. John is a single father of one minor son. He makes a will that leaves everything to the one son, but includes in the will a trust so that if his son is under age 25, it will be held in trust for him. John purchases a life insurance policy and names his son as the beneficiary, believing that it will go into the trust as provided in his will. John died, and his will was probated but the life insurance was payable directly to the son. At the time of John’s death, his son is 18 years of age. The son will receive 100% of the insurance proceeds. Obviously, this is not what John wanted, but because the son was beneficiary, the Will cannot override the insurance contract.

Example 3. Molly is 82 years old. She has 3 children. Two of her children live out of town and one, Cindy, lives in town. Cindy visits her mother regularly. The other two children visit when they can, but Molly loves them all equally and wants them to share in her estate equally. Molly makes a will that leaves everything she owns to her three children and names Cindy as the Executor. After making her will, Molly decided she wanted to make things easier for her daughter and had Cindy’s name added to her bank account. The bank officer told them that if they checked the box “right of survivorship” it would avoid probate. Molly died a few months later and at the time of her death, there was $180,000 in the bank account. Cindy went to the bank with the death certificate and the bank issued a check payable to her. Cindy’s siblings are mad, but there is nothing they can do since the account was set up with right of survivorship. The will does not control a survivorship account.

Example 4. Larry was previously married and has been remarried to Linda for 15 years. Larry makes a will which leaves everything to his new wife. Larry heard that a divorce revokes the provisions of a will in favor of the prior spouse, but wanted to make sure his new wife inherited everything. Larry dies and Linda learns that Larry had a life insurance policy which named his ex-wife as beneficiary. Unfortunately for Linda, the life insurance contract is not revoked as a result of divorce. Therefore, the ex-wife will receive the insurance proceeds.

In each of these examples except the first, the parties had wills but had accounts or beneficiary designations that could not be changed by the terms of the will. Therefore, it is crucial that when making a will to also look at how assets are titled or who is named beneficiary.
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John W. King, Jr. is a licensed attorney at Stubbs & Perdue, P.A. with 38 years of experience. He is certified by the North Carolina State Bar as a specialist in Commercial, Business, Industrial Real Estate, Residential Real Estate, and also in Estate Planning and Probate. He can be reached at 252-633-2700.

 

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