Your Will, Retirement Plan Beneficiary Desgination and Joint Ownership: Making It All Work Together

Recently I and one of my partners, Tom Hoffman, attended an Elder Law conference sponsored by the Pennsylvania Bar Institute. Also attending were hundreds of lawyers from all across Pennsylvania whose practices involve elder law issues. We gathered to learn about recent legal developments, best practices and each other’s experiences. 

This area of law grows more challenging every year. Clients and their attorneys are faced with navigating the challenges of estate and disability planning as state and federal laws change and judicial decisions are issued.

One of the recent court cases discussed involved the interplay of a mother’s will and assets she titled jointly with her two children, a son and daughter. The mother signed a will naming her two children as equal beneficiaries. Then, within two weeks she changed a $500,000 bank account from her name alone to a joint account with her two children with right of survivorship. The mother died several years later. Her son died only four days later. When the mother died, because the account had survivorship rights, it automatically became owned by her two children with right of survivorship between them.  When the son died, instead of the money passing to his family, his surviving sister successfully claimed she owned the entire account. When mother titled that account jointly with her two children did she intend that only one of them might inherit all of the money to the exclusion of the other child’s family? Did mother foresee the possibility this could occur? We’ll never know.

Estate planning does not necessarily need to be complicated. The vast majority of people can have an effective estate plan without creating complex documents. But everyone does need to understand the legal interplay between a will, jointly owned assets and assets governed by designated beneficiary provisions outside the will.

Too often people make random decisions to add children’s names to account without understanding the possible results. Many made their beneficiary designations on their life insurance, retirement plan or other financial account years ago and forget to update them as their life circumstances and those of their family change.

A number of years ago I was with a widowed woman whose only child died. Her son was unmarried, had no children, was disabled and living on his own. He had received government medical assistance. When he died his only asset of value was an IRA worth about $15,000. He never named a beneficiary of the IRA so the money would pass into his estate. His estate owed the state far more than $15000 toward repayment of the benefits he had received. Had the son named his mother as beneficiary of the IRA she would have inherited the $15,000 free of the state’s claim because it would not have been part of his probate estate. She had very modest assets and could have really used that money but she never got it. Did her son really intend for this result or did he just never get around to thinking about it? We’ll never know but either answer was emotionally difficult for his mother.

Often just a little time working with a knowledgeable estate planning attorney and professional financial advisor will save far more than the cost of planning. Failing to plan can have very high costs both financially and emotionally.

Published in TCAA newsletter Aug/Sept. 2017

Kurt Holloway

About the author
Kurt Holloway

R. Kurtz “Kurt" Holloway was admitted to practice in 1977 in Pennsylvania and later in the Eastern District Federal Court of Pennsylvania. Mr. Holloway’s areas of concentration are Estate Planning, Estate Administration, Elder and Disability Planning, Real Estate Law, Zoning and Land Development, Business Law and Municipal Law.

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