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What a Tangled Web We Weave By Signing Documents We Don’t Read

One of the questions we ask our estate planning clients is what documents they have already signed that might dictate how an asset is treated upon their death. The answer we usually get is, “Uhhhhh… I don’t know.” 

If this would be your response, don’t fret. It is really common to forget or not realize that you have already done a substantial amount of estate planning, just by filling out the pile of documents you sign when you do things like buy a house, open a bank account, or start a new job.

This blog post will cover some of the common, everyday contracts that govern what will happen to your assets when you die, and discuss why it is important to take a closer look at them. 

Deeds & Titles 

If you purchased property in the Houston area or bought some other significant asset with your spouse or with another investor, and one of you dies, the other person will either become the sole owner of the asset or will now share ownership of the asset with a new owner. 

What happens to a shared asset at the death of an owner depends on what the title or deed says. Even if you say something else should happen to the asset in your will, the deed or title will trump that provision and dictate what happens. 

Bank Accounts

When you open a bank account you are often required to indicate who the account should transfer to at your death. The bank often calls this a POD or payable on death form, and may not explain it fully. 

If you have filled out paperwork indicating that an account is payable on death to so and so, that person will automatically become the owner of the assets in the account at your death. If your estate plan says otherwise, or you were counting on using the assets in the account to fund some of your estate planning goals, that’s too bad. 

Insurance Policies 

All life insurance policies require you to pick a beneficiary, and an alternative beneficiary in case the first beneficiary dies before you do. Unless you update your policies, your insurance benefits will go to the beneficiaries you indicated when you purchased the policy, not the trust you carefully created in your estate planning documents. 

Retirement Accounts 

A federal law named the Employee Retirement Income Security Act of 1974 (ERISA) dictates how retirement accounts are to be split up when the covered employee dies first, leaving behind a spouse and children. The law also provides benefits to the ex-spouses of many covered employees. It shocks many people to learn that their ex-spouse may benefit when they die and that there is little that can be done to minimize the benefits that flow to an ex. 

Social Media Accounts 

Social media companies like Facebook are now encouraging their users to name another user who is authorized to take over a loved one’s account after the user’s death. As digital assets become more common and more valuable, expect to see more companies specifying what happens to their user’s accounts upon the user’s death. 

Read The Fine Print

If you have any of the documents or assets above, you already have an estate plan. What you may not have is an estate plan that fits your current needs or desires. Working with an experienced estate planning attorney to craft a customized plan that incorporates and updates your existing estate planning documents is the best way to ensure that the estate plan you have is the plan you want. 

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