Estate Distribution Doesn’t Always ‘Work Itself Out’

Money brings out both the best and worst in people. As financial advisers, we are fortunate enough to see generous investors make qualified charitable distributions from their IRAs or establish donor-advised funds for their favorite causes. Unfortunately, we also see seemingly loving families torn apart when an investor assumes, “things will work themselves out,” when it comes to distributing assets after death.

This week, our case clients are concerned that their dad will leave everything to wife No. 4 because he trusts her. She is more than 12 years his junior, so he wants her to enjoy his assets when he’s gone. He also finds estate planning tedious, and since they’re married, he can just leave it all to her, letting her distribute the assets he has said he wants to go to his sons.

The harsh reality is that it is dad’s money to do with whatever he wishes. He can leave it to wife No. 4 or to his barber’s cousin’s nephew-by-marriage. However, since his “decision” to leave it to his current wife seems to be because estate planning is “tedious,” his sons may want to have a conversation—albeit a delicate one—with him now to discuss what his wishes really are for his estate.

If dad were to die without a Will, Georgia’s intestacy law would dictate how the estate would be divided. With both a spouse and descendants, intestate succession dictates that the spouse and descendants equally share the intestate property, but the spouse’s share may not be less than one third.

Now, it is possible dad does have a Will and has made some decisions on who should get what. Dad could say in his Will that he wants his investment accounts split between his wife and sons, but if the account is titled as joint tenancy with rights of survivorship, the wife would get everything, and she is under no obligation to share with his sons. Even if her Will says the sons will receive the account upon her death, as long as she is competent to form a Will, she is free to change its provisions. She could decide she doesn’t like her late husband’s sons and change her Will to leave the inherited assets to her children from her previous marriage.

You’re nodding your head, thinking this doesn’t happen very often, but sadly, it does. We have come across more than one investor who neglected to update his beneficiary designation on his retirement account, and come time to distribute his assets, his ex-wife inherited his $500,000 IRA, while his current wife received nothing. There was also the time when an investor was a joint account holder with her elderly father because she was helping her dad pay the bills and manage his finances. After her father died, she inherited the account. Her two brothers then filed a lawsuit against her for their share.

“Things” don’t always work themselves out. We advise families to have their estate plan reviewed every couple of years to ensure it accurately reflects how they want their assets distributed. When reviewing the Will, families should also confirm how property, investment, and bank accounts are titled, and that beneficiary designations on insurance policies and retirement accounts are in concert with wishes specified in the Will.

Furthermore, this family wouldn’t need anything an estate attorney hasn’t come across before. Family situations like this are common. An estate planning attorney could help the dad set up a qualified terminable interest property (QTIP) trust that would provide for his surviving spouse while the ultimate beneficiaries could be the dad’s sons.

If you have questions regarding your estate plan and how your assets will pass on to your heirs, the experts at Henssler Financial will be glad to help:


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