Remember, though, that even if you have a will, federal and state laws govern the transfer of certain kinds of property at your death. A will does not control who gets assets that are transferred by
beneficiary
designation, such as savings in a
401(k),
403(b),
or
IRA,
or the
death benefit
of a life insurance policy, unless you make your estate the beneficiary. And that choice has drawbacks of its own, which can result in higher taxes and so a reduced inheritance.
A will also doesn’t control property that passes by what’s known as operation of law. For instance, property that you own jointly with right of survivorship — which is common among married couples and works as well for unmarried couples or a parent and child— passes automatically to the survivor at your death and not according to your will. In fact, depending on how your assets are arranged, it’s possible only a small fraction of your estate will be controlled by your will. For example, if your home and bank accounts are titled jointly with your spouse, who is also the beneficiary of your life insurance and 401(k) plan, little or nothing may be left to pass under your will.
While this may not be a problem for many people, if your will names other beneficiaries, such as another family member or a charity, you need to make sure you hold enough assets in your own name to satisfy these bequests. One solution might be to have your estate be the beneficiary of your life insurance policy and allow these assets to pass according to the terms of your will.
Or, if you own real estate jointly with one child you might make a second child the beneficiary of the life insurance policy or IRA.
No one solution works for everyone, but it pays to explore the possibilities as part of doing your estate planning.
Community property
Nine states, located mostly in the western United States, have what is known as a community property system of asset ownership among spouses. In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, property acquired during a marriage is equally divided between the two spouses regardless of whose name it is titled in.
Community property generally excludes assets either spouse brought into the marriage as well as any inheritance or gifts they receive individually. This is the owner’s separate property and passes according to his or her will.
Remember, though, that even if you have a will, federal and state laws govern the transfer of certain kinds of property at your death. A will does not control who gets assets that are transferred by
