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Effective estate planning involves much more than writing a will or creating a trust. One key element Floridians often overlook is planning for distribution of estate assets. While it may seem simple to leave assets to children in equal shares or to designate percentages for beneficiaries, the reality is often more complicated.
When a person creates a will or trust to pass property after his or her death, it’s important to take inventory of any property that would naturally pass outside those channels and make a conscious decision about how to manage them. When some assets pass through other mechanisms, the grantor must decide how to factor those outside distributions into the estate plan.
One type of property that often passes outside of a will or trust is an asset with a listed beneficiary. Some of the most common of these include life insurance policies and retirement accounts. These two assets require particular attention, as they may constitute a significant percentage of assets to be distributed.
For example, if a parent has the oldest child listed as a life insurance beneficiary, but then creates a will leaving everything to his children in equal share, “everything” won’t include the life insurance proceeds. This may result in asset distribution that is quite different from what the grantor anticipated.
Another situation in which property often passes outside the will or trust involves property held jointly with another person and includes rights of survivorship. One common example is a home owned jointly by a married couple, titled so that ownership automatically passes to the survivor if one owner dies. However, it is possible to create rights of survivorship in other types of property, including bank accounts.
Another common mistake in estate planning is failure to consider the costs of administration, debts of the estate, taxes, and other expenses that will reduce estate assets. An effective estate plan must take these costs into account, ensuring that the administrator of the estate has clear direction as to which assets should be liquidated if funds are required to cover these costs. Otherwise, the administrator may be unable to fulfill specific bequests or face objections from heirs as he or she determines how to meet legal and financial obligations and distribute assets.
A will or trust that directs only that assets be distributed in particular shares leaves the door open for conflict and dissatisfaction among heirs. Imagine, for example, that a man owns two properties of approximately equal value: a vacation home on the coast and a commercial building in an industrial area. He leaves all of his property to his brother and sister in equal shares. Without further direction, the administrator might distribute one property to each sibling, might distribute both buildings to the two siblings as co-owners, or might sell the buildings and split the proceeds between the siblings.
Of course, the siblings may not agree on which approach is best. In a worst-case scenario, one or both may turn to litigation, consuming estate assets.
Asset distribution planning is critical to ensuring that your wishes are carried out effectively after your death, and to facilitating a smooth and cost-efficient estate administration. Thoroughly review and consider asset distribution issues as part of your estate plan.
An experienced estate planning attorney can be your best resource. Protect yourself and your heirs with knowledgeable guidance—just call 386-320-6169 or fill out the form at the bottom of this page to get started.