When making an estate plan or a will, you aren't necessarily thinking about the legal details your heirs will endure after you're gone. But if you want to get your assets to your loved ones as quickly as possible and as intact as possible, it's a good idea to think ahead. In this blog post, we'll discuss some of the biggest mistakes people make that can make probate slower and more costly, as well as how you can fix them.
1. Not Executing a Will
If you die intestate, or without a will, in Kentucky, your spouse will inherit half of your assets. The other half of your estate will pass to your descendants, parents, or siblings. If you own property, the rules become a bit more complicated for your spouse under "dower and curtsey," an old concept of inheritance still applicable under Kentucky law. In Tennessee, if you die intestate, your spouse will inherit either one-third of your estate or a child's equal share, whichever is greater. The balance of your estate will pass to your children. If you die without a will, the rules can become complicated in any state.
Instead, make sure you have a will and keep it updated. You should name an executor or personal representative that you trust. While some of your estate may still need to pass through probate, your will allows the court to distribute your assets according to your wishes.
2. Ignoring Easy Ways to Keep Assets Out of Probate
You shouldn't stop at just making a will. You can keep almost any asset out of probate in both Tennessee and Kentucky if you make an estate plan. Some options include living trusts (also known as revocable trusts), joint ownership of selected assets, and payable on death or "transfer on death" designation for other assets.
A living trust can hold almost any asset you own, such as brokerage and bank accounts, personal property, real estate, and more. When you create the trust, you name yourself as the current trustee of the trust such that you can control all of the assets. In the event of your death, you name someone else as the trustee. Your assets will now be subject to the terms of the trust and, upon your death, your successor trustee can transfer it to the trust beneficiaries without going through probate.
3. Joint Accounts in the Name of One Child
If you put someone on your account as a co-owner, even if it's just to help pay the bills, that person immediately co-owns the entire balance of the account with you. At your death, the entire balance of the account will transfer to that person. Even if your will states that that account will be divided equally among your children, the fact that you named someone else as co-owner will override what the will says. These circumstances can be messy and it can take a court order to set it straight.
To avoid this situation, keep your accounts in your name to give you the most flexibility. In both Tennessee and Kentucky, you can add a "payable on death" (or “POD”) designation to your bank accounts to transfer them to your chosen heir. You can also register stocks and bonds in a "transfer on death" (or “TOD”) form and name a direct beneficiary.
4. Beneficiary Designations That Don't Match Your Will
Your will may state that all of your assets should be split equally among your heirs, but if your beneficiary designations don't say the same thing, problems will arise. For example, if you have an account or life policy that only names one child instead of all three, that policy will go directly to one child despite what your will says. Even if everyone knew that you had your son on the life insurance policy to pay for your funeral, that's not enforceable. Your son will get the proceeds of that life insurance policy as well as an equal share of everything else.
Instead, ensure that the beneficiaries of all of your directed assets match the heirs to your will.
5. Naming the Wrong Administrator
It can be challenging to find the "right" person to be the personal representative or executor of your estate. You want someone you trust, but you also need someone ready, available, and with the time to do the job. You don't want a situation where you name your oldest son as executor and, swamped at work, he puts it off but doesn't step down. At that point, your heirs may have to go to court to have him removed and have someone else named as the personal representative for probate.
Instead, ensure that the person you name as the administrator understands what the job will encompass. You could also consider having co-administrators to share the burden.
6. Naming a Minor as a Beneficiary
A minor can own property or have assets, but they can't manage them. If you name a minor as a beneficiary of money or property that isn't in a trust, the probate court will need to appoint a guardian or conservator until the child is 18. At that point, the child will get all of the assets without restriction.
Instead, consider a trust for any assets you wish to leave to a minor. A trust can ensure proper management and avoid the necessity of a court-appointed conservator.
The best way to avoid mistakes is to consult an experienced trusts and estates attorney. An attorney can give you the best options for your situation and your family.