Drafting a last will and testament is one important part of an estate plan. This document ensures that the courts distribute your assets as intended upon your death. However, there are certain types of property that you should exclude from your Alabama will.
We’ll explain each category and provide tips for legally and efficiently transferring these assets after you’ve passed away. Let’s get started.
#1. Life Insurance Policies
Life insurance is meant to provide for your loved ones upon your passing. Purchasing adequate coverage gives you peace of mind, knowing the insurer will pay funeral costs and dependents will get ongoing financial support.
You must name specific beneficiaries to guarantee that the death benefit reaches the intended recipients. While you can certainly leave a life insurance policy to someone in your will, doing so may send it to probate.
This move introduces unnecessary costs and delays, and funds are not guaranteed to reach heirs smoothly. Instead, directly name individuals as beneficiaries.
You might designate portions of the death benefit from a life insurance policy to:
- Your spouse or child(ren).
- An adult child with special needs.
- Charitable causes near to your heart.
Review and update beneficiaries accordingly as your circumstances change, for example, after a divorce or new family addition.
#2. Retirement Accounts
Retirement plans like 401(k)s, IRAs, annuities, and pensions allow for named beneficiaries on file with the administrator. These designations allow assets to pass directly upon death.
Consider the following guidance when assigning beneficiaries:
- Married couples should name their spouse as the primary beneficiary on ERISA-governed accounts to secure spousal rights.
- You may split percentages between primary and contingent beneficiaries as desired.
- Carefully weigh leaving retirement funds to those on government aid – consult their caseworker on how an inheritance could impact current benefits.
Getting beneficiaries right on retirement accounts ensures these funds remain out of probate. Loved ones gain fast, hiccup-free access while avoiding unnecessary taxes when possible.
#3. Business Interests
While it may seem logical to pass down your business interests, like partnerships and sole proprietorships, through your last will and testament, there are good reasons to avoid it. Relying solely on a will to transfer unincorporated companies risks delays, disputes, and continuity issues that can undermine the business’s value and survival.
Instead, customized succession planning is vital. Options may include buying-selling agreements, continuation agreements, or reorganizing your company into a more transferrable corporate structure.
Discuss business succession specifics with your attorney. Avoid business chaos down the road with advance planning beyond a standard will.
#4. Assets For Beneficiaries With Special Needs
If you have a beneficiary dependent on needs-based government benefits such as SSI or Medicaid due to a disability or special needs, an inheritance could cause them to lose eligibility if not properly handled. A basic will may not provide special needs protection. Assets left outright count as beneficiary resources.
A properly drafted special needs trust allows your beneficiary to use inheritance for comforts beyond bare government provision while shielding the assets from benefit means testing and retaining eligibility.
But special needs trusts require specific specialized legal language and administration rules. Work with an attorney experienced specifically in disability law and public benefits planning.
#5. Jointly Owned Property and Bank Accounts
Property owned in joint tenancy passes directly to the surviving co-owner automatically upon death under Alabama law. This means your will has no control over the transfer or disposition of jointly held assets like:
- Joint bank accounts
- Joint investment accounts
- Jointly owned family real estate with right of survivorship or vehicles with joint titles
So, if keeping control over asset distribution is a priority, or you have specific intentions for property use after death, avoid joint ownership arrangements.
Instead, own assets individually or in trusts permitting tailored instructions legally binding to your beneficiaries. Clarify financial institution procedures as well – some permit customized POD beneficiaries on individual accounts as another option. But consult your attorney before assuming your will governs joint property disposal – the co-owner may have priority.
#6. Anything You Don’t Want To Pass Through Probate
While people often rely on wills as the centerpiece for estate planning, Alabama probate introduces court processes, public records, delays, expenses, and hassles regarding wills upon death.
If privacy and quick, efficient transfer to your beneficiaries are priorities, incorporate planning beyond just a will to minimize assets requiring full court-supervised probate.
So, What Types of Assets Should Go in Your Alabama Will?
Typically, an Alabama will includes instructions for some variation of the assets below:
- Solely owned vehicles, jewelry, or collectibles.
- Any real estate holdings without joint ownership or trusts
- Instructions for businesses you own fully or hold partial interest in.
- Specific gifts of money or property to named charities that inspire you.
- Exactly who inherits your pets.
- Payment of funeral costs and outstanding debts.
- Appointing trusted executors and guardians for minor children.
Work with a Trustworthy Alabama Estate Planning Attorney
Ensuring your estate plan follows Alabama laws and transfers your assets reliably to beneficiaries without unnecessary burden should be a top priority.
Attempting to handle complex matters like business succession, special needs planning, or probate avoidance strictly through a basic will risks complications down the road for your heirs and estate.
Connect with our estate planning attorney at The Law Offices of Brenton C. McWilliams to craft customized solutions tailored to your unique assets, relationships, and intentions.
Contact us for an estate planning consultation today.