It is certainly possible to pass financial accounts on to your beneficiaries and heirs by naming them in your will. Many parents will simply indicate that children are supposed to split the contents of an investment portfolio or even a local bank account. They use their wills to specify which assets are supposed to go to which individuals, and they may provide additional clarification – such as the percentages at which those accounts should be split – within this document as well.
However, it’s problematic to assume that you need to address every financial account you have in your will. There are actually some types of accounts that do not need to be addressed in your estate plan at all. You can set things up in advance so that a desired outcome occurs automatically upon your death.
Life insurance policies
For example, a life insurance policy does not need to be transferred via a will. When you contact an insurance company to purchase a policy, the company is going to ask you to name a beneficiary. Most people will either name a child or their spouse, but you can name anyone you want.
The reason that you don’t have to repeat this information in your will is that the life insurance company pays the beneficiary directly as soon as there is proof that you have passed away. Even if your will gives the company other instructions, it is not legally bound to follow them. Therefore, if you need to update your beneficiary designation, you’ll need to contact the company directly, not update your will as to that specific information.
Payable on death accounts
Another example is a payable-on-death (POD) account. As with a life insurance policy, you’ll name a beneficiary for this account. When the bank gets evidence that you have passed away, the beneficiary will take over control of the account. Once again, there’s no need for this matter to be addressed in your will because the bank is going to follow the paperwork that you already have on file with it.
Both of these examples illustrate how estate planning can be simultaneously more complex and more straightforward than many people realize. This is just one of the reasons why it’s so important to look into all of your legal options when setting up your plan.