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Planning for the dispositions of one’s assets at death can take several forms, such as beneficiary designations, joint ownership with rights of survivorship, pay on death arrangements, trusts (revocable and irrevocable). Today I will discuss the Last Will and Testament (The Will). Unless there is a specific state or federal law, or a contract that one may enter into, practically all types of property ownership can be disposed of through one’s Will. There are several factors to consider when planning for the transfer at death for one’s property. No two persons are alike. Each of us has our individual temperament and family history. Each individual will have different objectives and wishes for the handling and management of his or her estate. Some family members may be spendthrifts; others may be very capable of financial management. The estate plan that suits one person may not be satisfactory for another. Provisions one may wish to make for one’s favorite charities and/or for one’s church can be made through one’s Will.

The type ownership one has can determine who inherits certain property. For instance, in Kentucky a joint bank checking account will pass to the surviving co-owner(s) upon the death of one of the co-owners, unless there is contrary written evidence. The passage at death of the first owner of real estate is determined by the type deed the owners hold. Banking accounts (both checking, savings, and CDs), stocks and bonds, and other type investment accounts are registered with the owners’ names. In many cases ownership is with another and the type owner registration will determine whether one’s Will can control the disposition of the property. Many times the largest asset one has will be employee benefits such as pension and 401(k) plans provided through the employer. Also, there could be considerable life insurance benefits payable at death. Normally with employee benefit plans and insurance plans a named beneficiary is designated, with one’s estate being the beneficiary if there is no named beneficiary or a beneficiary is not then living. The type ownership and the type of beneficiary designation you have made can often determine who receives your property. A beneficiary designation and survivorship provisions will control over a Will. For that reason, it is important to know the type ownership you have over your assets and what can pass through your Will and what may pass by means other than your Will.

The Commonwealth of Kentucky, as have most states, has provided for the distribution of your individually owned property if you were to die without a Will. If you are married, your spouse may be surprised to learn that they may only receive one-half interest of your individually owned assets without a Will. Kentucky law provides that a surviving spouse is given a vested interest (often referred to as the dower or curtesy interest) in one-half of your individually owned property at the time of your death. The remaining one-half (or all if unmarried) of your individually owned assets passes equally first to your children or their descendants, if any. If no children or descendants of children are living, then to your parents, one-half each. If you have no descendants or parents then living, your estate then passes to your siblings and their descendants. Only then, if there are no children or their descendants, no parents, and no siblings the other one-half passes to the surviving spouse. If no spouse, then Kentucky statutes provide for further distributions.

However, with a Will one can provide for individually owned property to pass to the beneficiary(s) one intends to enjoy such property at death. A Spouse can elect to take distributions provided for them under the Will or they can make an election to release what is given to them under the Will and elect to take a statutory share (generally one-half of the personal property and one-third of any real estate) of the estate as provided by the Kentucky statutes. With a Will one can provide for management of certain property for minor children through a trust until the time selected by you for the principal to be received outright. This could also be helpful for children who have not learned to manage their finances. A trustee would be appointed to hold and invest the assets for your beneficiary(s).

In situations where there is a second marriage and there are children from a prior marriage, an individual may wish to provide for one’s spouse while at the same time provide later for their children. This is often accomplished with provisions in one’s Will with a life estate for the spouse with remainder to the children.

There are instances where one has had provisions in a Will for certain assets, or specific amounts, to be bequeathed to other individuals but the Will provisions cannot be carried out since their assets were titled in a manner that prohibited the bequest from being executed by the executor. This is common when securities accounts or bank accounts are titled in a manner that does not pass through one’s Will. I refer to this type titling of assets as Will substitutes. They are very common, especially in husband and wife situations. These Will substitutes are very common and sometimes they are titled for convenience for the surviving co-owner. Sometimes individuals have the Will substitutes suggested by the individual advising them to avoid the probate administration process.
Other ownership types, other than banking accounts, often used as what I refer to as Will substitutes are:

  1. Beneficiary designation on life insurance policies or on IRAs, pension benefits, and 401(k) accounts.
  2. Placing an investment account with a financial advisor in joint names with right of survivorship or setting the account as a transfer on death account that can defeat a bequest in one’s Will of the same account.

To summarize, a Will only disposes of your individually owned property. Property that you have placed in ownership in joint names with survivorship will pass to the surviving joint owner and not as you may have thought with your Will. One thing we discuss with our estate planning clients is to always review how your property assets are titled to ensure that the Will substitutes and your Will are in agreement. Lastly, a Will is the only place where one can name a guardian for their minor child or for a disabled child and make provisions as they would like for their care and nurture if you were to die prematurely.

We will have further discussion on Will substitutes at a later time and how they can be beneficial to work in coordination with one’s Will. We have a full staff of attorneys at the Denton Law Firm that can assist with many estate planning issues.  See other articles by Mr. Jackson.