Wills and Probate Issues for Co-Parents

Co-parents looking to protect their relationships and their families should remember an important old saying: “Ignorance of the law is no excuse”.  Not knowing – or planning for – how the laws of your State deal with the assets of a deceased person can lead to some undesired results.

The laws of a state which dictate where a decedent’s assets will go when he or she dies without a Will are called “laws of intestacy”. Without a Last Will and Testament to accurately document where your assets should go after death, the state makes that determination. (Additionally, unmarried co-parents don’t benefit from the federal tax protections on passing assets to surviving spouses.) But not all co-parents may want for their assets to immediately pass to a young child without some kind of administrative framework.

An understanding of exactly what assets are protected by a Will is necessary before co-parents begin the drafting process.  Wills cover “probate” assets, which are assets that pass through the court system as they are attached to the process of court approval of a Will.  These assets include real and tangible property, bank accounts and securities held solely in the decedent’s name.  As the child of the decedent may be the closest living legal relative (if the decedent is not married), then the surviving co-parent, as guardian of the child if they are a minor, would be responsible for admitting the decedent’s Will into probate.  If the decedent is married, their spouse would be involved in the process as well, which may make the process more complicated.

A comprehensive co-parent estate plan is comprised of multiple documents covering various legal issues, from health care to power of attorney authorizations.  While the Will is the cornerstone, non-probate asset designations often comprise a significant amount of one’s estate.  A non-probate asset is any asset for which you have named a designated beneficiary.  These assets do not pass through probate and, thus, are very effective ways of protecting co-parents and the children of a co-parenting relationship from potentially undesirable outcomes of the probate system.  Examples of non-probate asset designations include:

  1. Life Insurance Policies
  2. IRAs
  3. 401(k)s
  4. Assets held in Trust
  5. Joint bank accounts
  6. Real property owned as joint tenants with right of survivorship

The predetermined distribution of non-probate assets provides co-parents with the security of knowing that these asset transfers are not subject to legal challenge.  This is a vital method of protecting the surviving co-parent and providing for the child of that relationship.  It is imperative that a nontraditional estate planner reviews and verifies all non-probate asset designations with his or her client to ensure their timeliness and accuracy.

By naming a beneficiary, or beneficiaries, on a non-probate asset, the co-parent avoids the time and expense of having those assets pass through probate upon the death of a co-parent.  Appropriate taxes will be levied on the receiving party as non-probate assets are considered income to the beneficiary – however, the ease at which these assets pass to the beneficiary may well be worth any inconvenience that income taxation may create.