There Are Differences Between A Will And An Estate Plan

The proper coordination of an estate plan can ensure that the proper individuals receive a decedent's assets.

Published on: Aug 29, 2013

By Troy Schneider

When I was a kid and brought a friend to my family's farm, they would often point to our heifers and say those are really nice cows. As most of you know, although they are related, a heifer is not the same as a cow. Likewise, a will is not the same as an estate plan.

Probate and non-probate assets

In order to know how you want your assets transferred upon your death, you must understand how different assets are often transferred upon death.  Life insurance, annuities, retirement plans and IRAs are likely paid to a beneficiary or beneficiaries designated by the deceased person pursuant to a contract or plan. Upon death, these assets are transferred based upon a contractual relationship and are not governed by your will.  For example, if you have excluded an individual from your will but failed to remove him or her from your life insurance policy, the excluded individual will still receive your life insurance policy proceeds.  

There Are Differences Between A Will And An Estate Plan
There Are Differences Between A Will And An Estate Plan

In addition, the form of ownership of an asset may affect how an asset is transferred upon death.  If you own an asset as a joint tenant with another individual, upon death the surviving joint tenant will acquire title by virtue of the death itself. Likewise, if an asset is owned by a husband or wife as survivorship marital property, full ownership of the asset will be given to the surviving spouse upon death. 

For example, if you have given your entire estate to your children from your first marriage in your will but your home is owned by you and your second husband or wife as survivorship marital property, then the home will be transferred as a matter of law to your second husband or wife, and not to your children upon your death.

Assets which are not automatically transferred at death are subject to probate procedures.  In general, probate is the legal process of administering the estate of a deceased person and distributing the deceased person's property under a will.  If the person dies without a will, which is called intestate, the assets are administered according to the laws of the state.  Some examples of probate assets include:

1.  property titled in the decedent's name alone;

2.  property titled in the decedent's name with another person as tenants in common; and

3.  life insurance policies, annuities, employment plans or IRAs payable to the estate.

Coordinating the transfer of assets

It is very important that beneficiary designations are properly drafted for non-probate assets so that unintended consequences are not created. 

For example, under a will, grandchildren may be entitled to the inheritance of a deceased child.  However, if the deceased child is listed as a beneficiary on the parent's life insurance policy with other siblings alone, then the deceased child's children will likely not receive any of the life insurance proceeds. In addition, a will or revocable living trust may have been carefully drafted with other trusts to minimize estate tax consequences upon death. However, if the client's life insurance policies and retirement plan benefits both have beneficiary designations that pass outside the will or revocable living trust, then those assets cannot be used to fund such trusts. 

Summary
A good estate planning attorney will properly coordinate the various assets of his or her client (both probate and non-probate) with the various estate planning tools, such as wills and trusts. Simply drafting a will is not enough. The proper coordination of an estate plan can ensure that the proper individuals receive a decedent's assets, rather than unintended beneficiaries receiving unintended benefits.  Bottom line – not all heifers are cows and not all wills are estate plans.

Schneider is a partner in Twohig, Rietbrock, Schneider and Halbach, S.C., a Chilton law firm that specializes in ag law. Call Schneider at 920-849-4999.