Making a Will May Not Work

August 17, 2010

You have done your job.  You have saved in your retirement plan.  You have life insurance.  You own your house jointly with your spouse.  You have a “payable on death” clause in your bank account directing it to your kids.  Surprisingly, if your assets are set up this way, then your will may have very little impact, if any, on where your assets will eventually end up.  This is because law and other obligations will supersede your will.

When you die, all of your assets can pass in one of only four ways:

  • By Contract — Certain assets allow you to name your ultimate beneficiaries.  For instance, you likely did this when you qualified for your retirement plan, first opened up your IRA account, or set up your life insurance policies.  Through this design, the organization or company that has custody over these assets are contractually obligated to pay the proceeds to your beneficiary at your death and supersedes the language in your will.
  • By Trust – A trust is generally a formal document that allows a trustee to control assets for the benefit of the eventual beneficiaries.  Any assets you place into a trust will be distributed according to the instructions of your trust and not your will.  As the trustee is obligated to follow the terms of the trust, these assets are treated similarly to assets designated by contract.
  • For example, a common estate planning technique is the use of a revocable trust as a substitute for a will.  In such a trust, your assets are transferred and retitled in the name of the trust while you remain in control of the assets during your life.
  • By Law – State law can also determine where your property ultimately goes.  Assets that are titled as “joint tenancy with rights of survivorship” will pass directly to the co-owner of the property and not according to your will.  Less than half the states, including Maryland and Virginia, still also allow “tenancy by the entirety”, which is a special type of joint ownership that exists only between spouses and cannot be sold or attached by creditors without the permission of both owners.
  • Ten mainly Southern and Western states, including Texas and California, have “community property” laws.  Such laws presume that most property acquired during a marriage are presumed to be held 50-50 by the two spouses.  However, any property acquired before marriage or inherited by one spouse is still deemed separately owned.
  • Additionally, if you die without a will, your state’s intestacy laws determine the ultimate beneficiaries of your estate.
  • By Will — Other property that do not have any of the above directives attached will pass by your will.

Understanding and using the first three methods are certainly effective methods of transferring property, and have the added benefit of avoiding probate.  However, be careful before spending too much time or money at preparing a sophisticated will if most or all of your property is contained within these categories.

 Making a Will May Not Work

Scott

Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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6 Responses to Making a Will May Not Work

  1. Ellen
    August 18, 2010 at 3:11 pm

    We just purchased a home and the deed says “Mr. & Mrs. XXXX, as joint tenants” instead of Tenancy by the Entirety. What is the legal difference between these two terms? Is the house still protected from an individual lawsuit filed against either myself or my spouse?

    • Scott
      August 19, 2010 at 7:20 pm

      Hello Ellen. Thank you for posting!

      As a result of your question, I wrote a post on this topic today. In your particular circumstance, it will depend upon where you and your husband live. If you live in MD or VA, it is indeed unclear whether or not “as joint tenants” would be enough to protect yourselves from a lawsuit against either one of you individually since “with survivorship” is not included in your deed. Depending on other estate and financial considerations (your net worth, who owns other property, are you about to be sued, etc.), you might want to change your title to “Mr. & Mrs. XXXX, as Tenants by the Entirety With Rights of Survivorship”.

      Let me know if I can be of further help.

      Scott

  2. audrey hearrell
    October 18, 2011 at 5:26 pm

    oct18,2011
    if deedmade entered june 1946 by XX AND xx to XX AND XX man and wife married for 52 yrs.no adoptions or children prior by either spouse only the two own the real property and one died intestate the spouse would be the suvivor under the tenancy by the entirety ownership between spouses reconized in va.law isn’t this law recognized?Dosen’t this law provide for a common law right of suvivorship and the property goes to spouse in a intestate isn’t this the laws based on the legal tradition of England that only exists between spouses?please respond post from Tx.

    • Scott
      October 21, 2011 at 2:19 pm

      Ms. Hearrell–

      Ordinarily, Virginia real estate owned as tenants by the entirety by a husband and wife will automatically pass to the survivor. And yes, this has been the common law for centuries. However, like most other laws, exceptions exist.

      Your question implies that you are personally involved in a Virginia real estate matter where a survivor of a tenancy by the entirety has not automatically received the property. Consider having the original deed looked at, and also try to verify the main rationale behind your opposition’s reasoning. For instance, were the husband and wife legally married? Did either spouse try to break up the tenancy? Did “xx” retain any interest in the property? More information would be needed for you to be able to get complete advice.

      Thank you for your question and good luck!

      Scott

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