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How “Convenience” Can Compromise Your Estate Planning Wishes

January 4, 2017

estate planning lawyers


In today’s world, convenience reigns as king. Whether it’s a fast food drive-thru, an automated machine that rents movies or a coffee maker that only makes one cup at a time, society now wants its products and services delivered as quickly and as conveniently as possible. Unfortunately, the legal profession is not immune to this trend as various law firms and online websites offer basic estate planning documents that can be obtained by filling in a few forms or making a few mouse clicks. Although this marketing strategy capitalizes on the societal need for convenience, the end result is usually anything but convenient for customers.

Convenience isn’t king in estate planning

A proper estate plan relies heavily on the individual’s assets, income, familial landscape and overall goals for the plan. Of course, any knowledgeable attorney or website can provide you with a standard Last Will and Testament and charge you a mere $100. Let’s ask the easy questions first: Will the document be legally enforceable? Yes. Will the document set forth the distribution scheme that you want? I would certainly hope so. Great, we’ve passed the legendary ‘sniff test’.

Now to the harder (and dare I say, more important) question: Given your assets and income, did you even need the document in the first place?

What do you mean; everyone needs a Last Will and Testament, right? Not quite.

For example, let’s consider Frank Smith. Mr. Smith has assets totaling approximately $250,000: His home in Niagara Falls, NY, his retirement account, a savings account, a checking account and Frank’s two (2) life insurance policies. After receiving advice that he needed a Last Will and Testament, Frank conveniently submitted his information online and received his Last Will and Testament.

Upon recommendation of his attorney, Frank had previously executed a life estate deed for his Niagara Falls, NY property. In short, once Frank passes away, his property will pass to his two children, Bette and Sally. Due to the language that is present in the life estate deed itself, the Niagara Falls, NY property is not distributed through Frank’s Last Will and Testament as the deed itself dictates to whom the property will transfer to at Frank’s passing.

Frank’s retirement account currently lists his two children, Bette and Sally as the sole beneficiaries of same. Once Frank passes away, Bette and Sally will receive the proceeds of Frank’s retirement account (likely in the form of a rollover IRA). Again, due to the fact that Frank’s retirement account had named beneficiaries, the proceeds of this account are not distributed through Frank’s Last Will and Testament as the terms of the retirement account contract dictate who will receive the funds.

The same rationale may be applied to Frank’s two (2) life insurance policies. As Frank ensured that Bette and Sally were listed as the beneficiaries of said policies, the two girls will receive the proceeds of these policies upon Frank’s passing (usually in a lump sum check); Frank’s Last Will and Testament does not determine to whom these funds will be paid.

Finally, Frank recently added ‘transfer on death’ beneficiaries to his checking and savings account (TOD designation). Frank’s checking and savings accounts now read: Frank Smith TOD Bette Smith and Sally Smith. Now that this designation has been completed, when Frank passes away, his checking and savings accounts will pay out to Bette and Sally, equally. Again, the ‘transfer on death’ designation trumps anything that has been written in Frank’s Last Will and Testament as the checking and savings accounts will transfer to Bette and Sally regardless of the terms of Mr. Smith’s Last Will and Testament.

The difference in working with an estate planning attorney

Now that the dust has settled on Mr. Smith’s legacy, it’s easy to see that Mr. Smith really did not require the Last Will and Testament that he purchased online. Each of Mr. Smith’s assets were categorized as non-probate, meaning that they passed to named beneficiaries outside of the terms of his Last Will and Testament and outside of Court jurisdiction. Quite simply, Mr. Smith wasted his money and did not really need a Last Will and Testament after all.

This simple example is one illustration of how important a thorough asset review is prior to the drafting of any estate planning documents. A good estate planning attorney should not blindly provide you with your documentation and push you out the door; but rather, he or she should comprehensively review each of your assets with you and your financial advisor in order to determine if a document is needed and which document best suits your needs and future goals.

Our previous example can also be used to illustrate another important point regarding estate planning. If Mr. Smith had not designated his daughters as the beneficiaries of his retirement account and life insurance policies and instead had designated his predeceased wife, Doreen Smith, these accounts would all be payable to Mr. Smith’s estate, meaning that they would be transferred pursuant to the wishes outlined in his Last Will and Testament.

Although Mr. Smith’s Last Will and Testament dictates that these items will ultimately pay out to his daughters, Mr. Smith’s estate must now be probated and will be subject to legal costs, court fees and potential tax implications. Upon coming to the realization that the aforementioned expenses may amount to tens of thousands of dollars, it is quite frustrating to realize that this money could have been saved had Mr. Smith ensured that his beneficiary designates remained current after his wife’s passing. Again, the initial asset review performed by your estate planning attorney should always examine all beneficiary designations in order to ensure that they are correct. Furthermore, proper recommendations should be made regarding the drafting of a life estate deed and the designation of joint owners and/or TOD beneficiary on any checking and/or savings accounts.

A little extra time can result in far greater results (and better peace of mind)

Estate planning should not be viewed as an in-the-door, out-the-door exercise in convenience. A knowledgeable estate planning attorney should never merely provide clients with boilerplate documents and send them on their way. A proper estate plan requires a detailed asset review, a review of all policy beneficiaries, discussion of all tax implications with an accountant, and thorough recommendations regarding document drafting that may include advanced distribution techniques such as trusts for minors, life estate deeds and credit shelter trusts.

Restaino Reddien can help you protect your assets (and your loved ones)

Although not as “simple” as clicking “submit” online, estate planning is very rarely a time-intensive process. Call us at (716) 235-5885 to learn more about how we can help you with your estate planning needs.


Related Topics: Estate Planning

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