Not all assets are considered fair game for probate of an estate. Only the assets that are in the deceased person’s (or decedent’s) sole name need to be processed by the probate court. Anything that is jointly owned or anything that has a beneficiary associated with the asset goes directly to that individual listed. Many people believe that having one beneficiary is enough to satisfy this requirement. However, I usually recommend clients have at least one secondary beneficiary listed to ensure that the asset does not need to go to probate.
Most of clients’ estates is wrapped up in investments, retirement accounts, and life insurance. While an individual’s house is also a large asset in the person’s potential “probate” estate, by the time most of us retirement, we have up to six figures in retirement accounts alone. The last thing you want is to have that asset be processed by the probate court, considering the inventory fee assessed by Michigan probate courts ranges anywhere between three to five percent. That could result in a sizeable fee being assessed by the court, which puts an incredible burden on your loved ones who have to probate your estate.
Having a primary beneficiary named on each of your investment accounts is a good first step. However, what happens if the person named as your primary beneficiary predeceases you? If you do not have a secondary beneficiary lined up, this asset will need to be probated before it can be closed, and the funds distributed. Not only will the funds be taxed when the accounts are closed, but an inventory fee will also be assessed, which will reduce the amount that will eventually be distributed.
The best course of action is to either replace the name of the deceased primary beneficiary with a new primary beneficiary or to ensure that you have secondary beneficiaries lined up to inherit the account(s) in the event the primary beneficiary is deceased. If a client has a revocable living trust and minor children as beneficiaries, it is usually advisable to have the living trust listed as the secondary beneficiary. In the event the secondary beneficiaries are adults, it may be beneficial to list them individually instead of the living trust.
If you are unsure of whether your beneficiary designations are properly covered on your retirement and other investment accounts, your financial planner should be able to assist you in ensuring these accounts are covered. It is important to review all your accounts to confirm that you have properly listed both primary and secondary beneficiaries.
At Sullivan Law, we offer estate planning packages at a flat and reasonable fee. We also offer free consultations to discuss what your needs are, what you would like to do, and how that can be best accomplished. Everyone’s needs are different, and your wishes should be clearly listed and understood.
Call us at 248.917.1351 or email at asullivan@sullivanlawonline.com to schedule your free consultation today. We look forward to working with you!