Estate Plan: Is a Simple Will Enough?

Our estate plan is a will. Is that enough to make sure our son inherits?

Q: I read about people putting their home in trust to avoid probate. Our estate plan is a simple will. Our house and everything we own, including our money and personal effects, is left to our son. I thought that would be proper. Were we misguided when the will was made?

A: There’s nothing wrong with putting together and signing a will as an estate plan. We wonder how you have titled your assets and what will happen to those assets upon your death.

In our mind, a proper estate plan includes, at a minimum, a will, powers of attorney for health care and financial matters, and a living will that states what medical care you want in case of an emergency. On top of that, you might want or need a trust, depending on what assets you own.

Revocable and Irrevocable Trusts

Let’s start with your will. You and your spouse each wrote (or, an attorney drafted) your wills and you signed them. Those wills state that upon your death, your assets likely go to each other. When the last of the two of you dies, your assets go to your son. So far, so good.

A good estate plan takes into account your assets. Generally, for most people their home and their retirement accounts are their two single biggest assets. We suspect you and your spouse own your home as joint tenants with rights of survivorship. That means if one of you dies, the other would automatically inherit the other half of the property.

When the last of you dies, your will would kick in and your son would inherit the entire property. But here’s the issue: a will must be filed with the probate court. Then, a probate case would start and an executor of the will would get appointed. You would have named the executor in your will and that person is the one that gets appointed. Once appointed, that executor would then have the ability to transfer your home’s title into your son’s name. This is what going through probate looks like. It can take time, and be expensive. You have to have to hire an attorney to help you. And, there are court costs that sometimes equal a percentage of the value of the estate.

Signing Legal Documents as Part of Your Estate Plan

Let’s turn to your bank, financial and investment accounts. If you hold these accounts in your names as joint tenants with right of survivorship, your son will have to go through probate to get access to these accounts as well. The will alone won’t allow him to show up at the bank and ask the bank to transfer your money to him. In fact, the cash will likely be tied up for some time as the process moves slowly. The same goes for your cars, boats, and mobile homes.

So what can you do? Start by making a list of everything you own and how you hold title to all of your assets. Be sure to include bank, brokerage, and retirement accounts, insurance policies, vehicles, and real estate. Go down that list to see what arrangements you’ve made for the transfer of those assets upon your death.

Estate Planning: Will, Living Trust and Power of Attorney: Which Do I Need?

Some assets should automatically transfer to your son upon your death. For example, Individual Retirement Accounts (IRA) and retirement plans usually require the owner of the account to designate a beneficiary for the account. If you’ve named your son the beneficiary of those accounts, they will avoid probate and transfer to him automatically with proof of your death.

When it comes to your home, one option you can consider and may or may not be a good choice for you, is to file a transfer on death instrument that would convey your home to your son upon your death. Your investment accounts and other bank accounts may also provide an option to designate a transfer on death option for the account.

How do you hold title to your vehicles and other similar assets? Find your titles and see or check with the state in which those assets are located and registered. Some states allow survivors to transfer ownership of those assets by filing some paperwork. Or, they’ll also go through probate.

Estate Plan and Trusts: How to Handle a Home in a Trust

Lastly, estate plans often use trusts. You can put your assets into a living trust that designates your son as the successor beneficiary to you and your wife. Your home, bank and financial accounts that don’t allow you to transfer the account to your son upon your death, vehicles and other registered assets could be transferred into the trust. When the last of you dies, your son would automatically become the successor trustee and beneficiary of everything you own in the trust.

The trust option would not require your son to open up a probate estate, unless you forgot to put an asset into the trust or your son finds something that remains that must be probated. For example, we have known people to purchase bonds and stocks and keep them in paper form. When they die, their heirs find them and have to go through probate before they can sell or transfer them.

Who Should Inherit My Mom’s House?

There are some other issues for you to consider. Assuming your son is your only heir, what happens if he has a catastrophic accident or precedes you in death? Where would you want your assets to go in that case? Also, if you have an exceptionally large estate, it may make sense for you to separate your assets into two trusts, and have him inherit some of those assets when one of you dies rather than waiting for both of you to die. What if he marries and you don’t like his spouse, but they have children? You might want to set up a trust with some guardrails so that your grandchildren inherit your estate.

As you go down your list of assets, decide what happens to each asset when one of you dies, both of you die, or your son predeceases either of you. If your son is single, divorced or married, or whether you have other children, you need to consider what happens to your assets in each scenario.

Settling an Estate

It gets complicated, and it’s hard to talk about money and death. That’s why we usually recommend speaking with an estate attorney, who can evaluate whether your estate plan is sound or if you need to set up other documents.

Finally, it’s possible you’ll miss something, even if you take care in listing everything you own. If so, your son can open up probate. If the assets involved are small and you find the right attorney, it should be a fairly quick process at a nominal cost.