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Who gets what?

Posted August 27, 2014 in Advice Column, Pleasant Hill

In a perfect world, everything you own would go to your desired beneficiaries — exactly as you intended, according to your will.

Unfortunately, we don’t live in a perfect world. If you die unexpectedly, your assets may well not go to where you want them,  unless you make arrangements in advance.

• Probate. The first concept to understand is probate. This is a formal legal process in which the courts give everyone you ever owed money to a chance to file a claim against your estate. This process can take months or years and is very expensive. But some assets skip probate and go directly to family.

• Intestate laws. Once your assets clear probate, then no problem — the courts will distribute everything that’s left according to your will. Absent a will, your state intestate laws take over. Each state has different intestate laws, and they may not reflect your wishes. Plan in advance.

• Your home. Your home usually won’t bypass probate. If your spouse lives with you and owns the property with you, it will probably go to your spouse. However, if you are unmarried, live with a partner and don’t leave a will, your house may go to your children. That may not be what you want.

Tip: Look to see how your home is titled. Does your spouse or partner own it as tenants in common or tenants in the entirety? The answer can have huge ramifications. Consult an attorney to learn what that means in your state.

• Bank accounts, stocks, bonds and CDs. These go through probate, although most states provide some provision for widows to access at least some of the cash to meet living expenses, pending the completion of probate. Consider putting your heirs’ names on the account.

• Life insurance. Life insurance bypasses probate. Death benefits are ordinarily tax-free and usually go to your beneficiary in a matter of days.

• Retirement accounts. Retirement accounts such as IRAs, 401(k)s and 403(b)s also bypass probate  if you name a beneficiary. Otherwise, these accounts become part of your estate  and subject to probate and the claims of creditors.

• Annuities. Generally, annuity balances or death benefits go to the family and bypass probate, so long as there is a named beneficiary. If there is no named beneficiary, your family will have to wait on probate.

• Stepchildren. Generally, intestate laws only recognize formal family relationships. Without careful planning, you may accidentally disinherit a stepchild or life partner.

• The bottom line. The most important things to remember: Work with an experienced attorney licensed in your state, update your will, and update your beneficiaries on retirement accounts, life insurance policies and annuities.

Information provided by Brenda Reichert, branch manager, 1225 Copper Creek Drive, Suite M, Pleasant Hill, 515-278-5333.

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