Operation of Law: Coordinate your Will and Property Ownership, etc.
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You know the importance of having a will. If you die “intestate” (without a will in legal language), your state’s laws will determine the disposition of your assets. Your actual wishes will be irrelevant, even though they may be well-known to your friends and relatives.
But even if you do have a will, here is a critical point: Your will has no effect on asset distributions that automatically occur upon your death under “operation of law.”
The most common applications of the “operation of law” principle is with life insurance death benefits and tax-advantaged retirement accounts.
For example, whoever you designate as the beneficiary of your life insurance policy will automatically receive the death benefit proceeds. It doesn’t matter what your will says about who should receive the money.
Similarly, the person or persons designated as the beneficiary of your tax-deferred retirement account, traditional IRA, or Roth IRA will automatically receive that money by “operation of law.” It makes no difference if your will contains contrary instructions.
Another example: When you co-own real estate with someone in “joint tenancy with right of survivorship,” that co-owner automatically inherits the whole property, regardless of what your will says.
You may have other assets that are affected by the “operation of law” rules. Talk with your estate planning adviser to ensure your wishes are carried out.
Finally, at the same time you have your will drafted or revised, be sure to get all your beneficiary designations and real property ownership arrangements in line with your current intentions about who should receive what, after you die.
From today’s TrustCounsel eNewsletter.
