By Attorney Daniel Vu
Changing who will inherit your estate can be a lot trickier than you think. You might think that all that you need to do is change your Will. However, changing only your Will would be a costly mistake. The beneficiaries you intend to inherit your estate will lose out on any asset not governed by your Will. Any asset that has named beneficiaries avoids probate and is not governed by a Will. For example, your IRA avoids probate because you most likely have designated beneficiaries on each individual IRA policy. This is also the case with your life insurance policies and many other types of financial accounts. So if most of your assets will avoid probate, changing just your Will would effectively change very little of your estate distribution and it may cause you to accidentally leave something to someone you had no longer wanted to receive as much or anything at all.
If you want to make sure you are not creating an “accidental beneficiary”, you will want to coordinate the changes on your Will and each and every asset that has named beneficiaries. In many cases a Trust can make this easier. For example, if all of your assets are owned (“funded”) into a Trust or made payable to a Trust, then you can make a change with one simple amendment to the Trust. The beneficiaries on all assets owned by the Trust would automatically change. But beware, even if you have a Trust it does not mean that everything will be controlled by the Trust. For various legal or tax reason there may be a select few things that must be left out of the control of the Trust so you will still need to do your due diligence to make sure that all of your distributions by Will, Trust or otherwise are updated to reflect your latest wishes.
Of course it is not uncommon to see people will change their wishes on their Will or Trust but forget about changing their IRA or something else not in the Trust or probated by the Will. This is fine if that difference was intended! Otherwise it’s a costly mistake for your intended beneficiaries and a very lucky thing to happen to your now accidental beneficiaries!