Q: I’m embarrassed to say I don’t have a will. Aren’t there other ways to give my money away after I die besides through a will? I’m worried about what happens if I suddenly die.
A: Dying without a will is known as dying “intestate.” When that happens, your assets pass through the probate process and the state decides how your assets are divided. The state’s decision is based upon family ties – spouse, parents, children, siblings, etc.
As ugly a process as many folks believe probate to be, probate is simply the process of bridging the gap of ownership. In other words, probate makes sure your assets end up in the right place.
There are several means outside a will that can direct to whom your assets pass:
Beneficiary designations: Most folks are familiar with such forms for insurance, but a beneficiary form also directs who will receive your IRA or 401(k).
Joint ownership with rights of survivorship: Having another individual’s name on your banking accounts allows the balance of those accounts to transfer to the surviving owner.
Payable-on-death (POD) accounts: Sometimes referred to as an informal revocable living trust, these accounts are created when the account owner designates a recipient of the account balance upon the owner’s death.
Transfer-on-death (TOD) accounts: This is the investment industry’s version of the bank’s POD.
There are pros and cons to each of these means for passing your assets to someone upon your death. I am still a proponent of everyone maintaining a current will, which in combination with some of the above designations can make clear your final wishes.
No matter how you plan to distribute your assets after you die, make sure your instructions are in writing AND updated regularly. It could be a bit awkward when a chunk of your assets pass to last year’s girlfriend, instead of this year’s wife. (Yes, I’ve seen it happen.)
D. DRUMMOND OSBORN, CFP, is a lifelong LaPortean and Director of Wealth Management at Osborn Wealth Management, a Registered Investment Advisor, where he focuses on financial planning, investment management, and trust advisory services. Check him out at www.osbornwealthmanagement.com or e-mail him your questions at drummond@osbornwealthmanagement.com.
