You have worked hard, been successful, and are proud of the property you have accumulated.  You want to make sure it is protected for your loved ones, and you have taken the responsible step of making a Will.  Among the distributions in your Will, you have provided that your retirement accounts will go to your adult children, your life insurance proceeds will go to your grandchildren, and your brokerage account will go to your little sister.  You rest easier knowing you have this all sorted out – but maybe you shouldn't.

In Texas, a Will covers all your “probate” assets, but what is a “probate” asset?  This is a question that causes a lot of confusion among individuals who believe they have a straightforward plan for their property.  A “probate” asset is an asset that is directly and solely owned by an individual at their death.  That seems simple, so why the confusion? 

Let's take your retirement account, as an example – You contributed to it, and it is in your name.  Your Will says it should go to your adult children.  Not so fast.  When you set up your retirement account, your plan administrator had you designate a beneficiary.  The beneficiary designation is usually done on a form provided by the plan administrator, or it may have been done online.  The designation of the beneficiary creates an ownership interest in the account that is contingent on your death.  The beneficiary designation changes your retirement account from a “probate” asset to a “non-probate” asset.  As a “non-probate” asset, your retirement account is not controlled by your Will, and will pass by operation of law to the beneficiary you have designated with your plan administrator.  In our example, if your designated beneficiary is anyone other than your adult children, then your entire estate plan is unintentionally altered.

The same idea applies to any accounts or assets that have a beneficiary designation outside of your Will.  This can be things such as life insurance policies, joint bank accounts, POD or TOD bank accounts, brokerage accounts, etc.

An estate plan is not always limited to the creation of a Will, and it is always a good idea to seek experienced legal counsel regarding your estate planning goals.  After all, we all have things that we don't know that we don't know.

*Please note that Blog Posts are for educational purposes only and should not be considered legal advice.