For lawyers advising clients regarding their estate plan, understanding the client’s full financial picture is vital in providing sound estate planning advice. An attorney’s guidance to a client is incomplete without a discussion and review of nonprobate assets and how these assets are titled or designated. Even though a client may execute a will giving his or her entire estate to a person or class of persons, that’s often not the full story. The client will likely have some assets that do not pass through the will. Actually, for some clients, the will might pass only a small fraction of a client’s estate. Therefore, ignoring a client's nonprobate assets or paying little attention to them could be a big mistake.
The proper use of nonprobate assets can have many advantages. Typically, nonprobate assets can be accessed quickly after a person dies, often with only an original death certificate. This can make liquid assets available quickly for certain final expenses of the decedent. Also, in the right circumstances, a person’s entire estate could be designated to pass through nonprobate assets, possibly making a probate and its costs unnecessary.
On the other hand, the improper use of nonprobate assets can lead to problems. Establishing a joint account with another person, merely for the convenience of giving that person the ability to pay bills, can lead to disagreements later when the full balance of the account passes to that person. Improper beneficiary designations of IRAs and other retirement plans can lead to negative tax consequences. Inconsistent designations, such as through the use of a community property agreement and joint tenancy, can lead to confusion and possible litigation upon the death of a client. Careful planning, review of all assets, and a thorough understanding of these assets is essential to doing estate planning right.
I will be speaking on this subject on April 19, 2018, at a continuing legal education seminar sponsored by the King County Bar Association at the Washington Convention Center. The seminar is titled "Personal Estate Planning for the 99%," and will have many experienced estate planning attorneys speaking on a wide range of topics. If you cannot attend, you can download my written materials on Planning Considerations for Nonprobate Assets and find my slides here.