"But I just want a simple will!" "I'm not rich!" That's how some new clients respond when our attorneys ask to see a list of their assets and how they are owned (titled). We make the same request when we meet with clients for their periodic estate planning reviews.
We are no more fond of unnecessary paperwork than you are, so we understand resistance to filling out forms. Nonetheless, an accurate, complete and up-to-date asset list is essential if we are to ensure that your estate plan is, and remains, effective. Here's why: Assets for which you have named co-owners and/or death beneficiaries will not be distributed according to the provisions of your will. These assets will pass "outside" your will, by operation of law. This is not necessarily a bad thing; well-considered beneficiary designations may have a useful role in your estate plan. However, if your beneficiary designations do not reflect your true intent, or if you mistakenly believe your will supersedes the designations, you could be creating chaos for your family.
Here's a recent case that illustrates the point: Pennsylvania resident Gary Vassil worked for the federal government in 1997. At that time, he named his wife, Denise, as an 83% beneficiary of his Federal Employees Group Life Insurance Policy. The remaining 17% was to be divided among three other named beneficiaries: Megan Vassil, Melanie Vassil and Rhonda Ludwig.
Gary and Denise divorced six years later. In April 2016, Gary died. Upon his death, the insurance proceeds were distributed as Vassil had requested back in 1997, with 83% earmarked for his ex-wife. As you can imagine, this did not sit well with Megan, Melanie and Rhonda. When they asked Denise to waive her rights to the policy and she refused, they took their case to court. But they did not get the outcome they wanted from the court, either: While Pennsylvania law denies an ex-spouse the benefit, federal law governing the policy prevailed in this case. Under the federal law covering the federal employees insurance policy, the death benefit must go to the named beneficiary (or beneficiaries) - unless the owner has changed the beneficiary, or the divorce decree indicates the ex-spouse is not entitled to it.
The court wrote: "It may well be that Gary Vassil did not realize that if he wanted to change the distribution of his life insurance benefits following his divorce, he needed to submit a new beneficiary designation form or some other proof of his intent to alter his beneficiaries as required by §8705(e). If so, the payment of benefits to Denise Vassil would be contrary to the genuine wishes of Gary Vassil, and that is unfortunate. However under the applicable federal statute the Court does not have the power to remedy such a mistake." (You can read the text of the case here.)
Keep in mind that divorce is only one of life's many twists and turns that can impact on your beneficiary designations and therefore, on your estate plan. Our attorneys occasionally meet with people who have forgotten about an asset that names a now-deceased person as beneficiary. Sometimes we discover that a spouse who is in a nursing home and receiving Medicaid benefits is still listed as a death beneficiary for an asset and thus, if the well spouse were to die first, that inheritance could terminate the beneficiary's Medicaid benefits.
Insurance companies, brokerages and banks are bound by the law. They cannot ascertain what an asset owner's true intention might have been, or make moral judgments about which beneficiaries are really entitled to what. Therefore, it is up to you to make sure your beneficiary designations truly reflect your current situation and your current intent. Our Florida estate planning attorneys will review your asset list when we meet, and will help you determine if any of your beneficiary designations needs fine tuning. Note that if you want to change beneficiaries, it cannot be done through your will. You must notify your insurance company, banks, brokerages, etc., and submit the appropriate forms. It is always a good idea to request written confirmation of the change, and save the confirmation for your records.