A client that I had not seen for several years called me the other day wanting to add a newborn grandchild to her estate planning. I told the client that I would need updated financial information in order to revise her estate planning documents. The client was unhappy that I was requiring so much information when all that she wanted was a simple change to her beneficiaries. Sometimes clients may feel that attorneys ask for this information so that they can charge more depending on the wealth of the client. However, knowing what a client has and how it is held is critical in effectuating the client’s estate planning.
For instance, often between visits to the attorney’s office the clients change their financial holdings. When new CDs or bonds are bought, the client may decide to title them differently than the prior holdings. If a new CD is titled with a beneficiary designation rather than just in the client’s name, then the client’s Last Will and Testament will not control the disposition of that asset. If that asset were required to make the proposed gift to the new grandchild, then changing the Last Will and Testament will not make the client’s desired change to the estate planning. The Last Will and Testament controls only those assets held in the decedent’s name alone, without beneficiary designations.
People often worry about making sure that a responsible friend or family member have access to their accounts in the event that they become ill and are not able to pay their bills. Good estate planning documents will have provided for this problem through a durable power of attorney, through the naming a successor trustee in a revocable living trust or both.
Sometimes these worries about access to accounts arise several years after estate planning has been done and the client may not remember that this problem has been resolved in the documents. If the client expresses the concerns to bank personnel, the bank employees often suggest adding the responsible family member or friend to the accounts.
This very situation occurred recently with a client I had worked with approximately one year ago. She became concerned that it would be inconvenient for her son, who lives out of state, to pay her bills if she became sick. So she and her neighbor went to the bank and changed every financial holding: checking, savings, and CDs to joint ownership with the neighbor. This change was made solely to provide access, she still wanted family members to inherit from her. Had this not been rectified and she had passed away, her neighbor would have become the sole owner of the assets by operation of law. My client’s Last Will and Testament would have had no effect on the disposition of the assets. I believe that the neighbor was well intentioned and if she knew that the client had wanted her family to have the assets that she would have done what she could to transfer the assets to the appropriate persons. But she would have had to use part of her tax exclusion to do so, which may have had an adverse effect on her own estate planning. Also, if the neighbor had any creditor problems, the assets would be at risk.
So when your attorney asks for information about your holdings when you wish to make changes to your documents, or when you have a periodic estate planning update appointment, rest assured that you are in good hands and the attorney is doing so to ensure that your planning will work in the way that you intend. You should be concerned if your attorney does NOT ask about your holdings.