There are a million reasons that people put off creating a last will or estate plan. Many people find the idea of deciding who gets what rather stressful. There is also the fact that estate planning is a continual process, with your last will requiring updates as your family situation changes.
For some people, the stress they mentally associate with estate planning can lead them to make questionable financial decisions. A common mistake is the assumption that creating beneficiaries or secondary account holders for major financial accounts will be enough to allow your estate to avoid probate. While that may work in some cases, more often, it will leave your family vulnerable to the expense and delay of probate court.
Transfer on death orders only offer minimal protection
Creating a joint bank account is often the simplest and fastest way to ensure that the assets in the account transfer immediately to another party upon your death. However, joint ownership of the account means joint control of the account. If you don’t want someone accessing your assets while you are still alive, you will likely choose to create a payable on death account, also known as a transfer on death account.
These specialized accounts have beneficiaries listed who do not have control of the account while you are alive. After your death, beneficiaries receive the full balance of the account, as well as legal control over it.
There are many potential issues that come from simply relying on a transfer of accounts as a means to avoid probate. The most glaring and obvious is the fact that anyone else in the family can choose to contest the transfer of the account.
Also important is the consideration of whether the person who assumes control of the account will follow through on verbal promises to distribute funds. Greed has a funny way of taking over people when they stand to inherit large amounts of money. Someone you trust implicitly could choose not to distribute assets and retain them all for themselves.
Creating an estate plan is typically the best choice
While it does take a bit of time and consideration, developing a thorough estate plan is a better option for you and your family than hoping for a positive outcome. Putting your faith in one person lacks the legal recourse to protect your other heirs.
An estate plan allows you to allocate specific assets to different people in your family, including large financial accounts. You can even create a trust, which can give you more control over how and when your heirs access the assets you left behind for them. Most importantly, a thorough, updated, legally sound estate plan can help you and your family members avoid the stress, expense and frustration of probate court.