Take care so bank/broker don’t interfere with your Will

This column first appeared in the San Antonio Express-News on June 23, 2017

wall street, new york city 3Dear Mr. Premack: A lawyer who was a family friend wrote my parent’s Wills. My mom passed some years ago leaving everything to my father. My father passed a couple of months ago leaving everything 50/50 to me and my sibling. Except, now that it went to probate I didn’t get 50%. My sibling got to all my father’s bank accounts – 1000’s of dollars – and I am getting no cash, only 50% of the land and house and other items. Why do lawyers write a Will leaving things 50/50? It is awful and not what my parents wanted. TJF

In fact, your parents wanted exactly what the lawyer wrote: that each of their children would receive 50% of their assets when they both died. The problem is not the Will. Rather, the problem is that banks and brokers have power to override the terms of a Will when accounts are established, and that they do so without properly warning the accountholders of the impact.

Let me give you an example. Dad owns a home worth $150,000 and a CD worth $300,000. He goes to an experienced attorney for a Will that divides all those assets 50/50 between his two adult children, Sue and Tom. Sometime later, his CD matures. He finds a better interest rate at a new bank, so Sue drives him there to open a new CD. The banker suggests that Sue be added to the account, and Dad says ok because he wants Sue to be able to renew the CD for him if he gets sick.

The banker prepares the account documentation, listing Sue as “joint with right of survivorship” on the new CD. There is no explanation, and the words “right of survivorship” are not highlighted or emphasized. Sue and Dad sign, then go home and forget about it. Dad has no idea that the agreement with the bank takes precedence over the terms of his Will, and that he has just inadvertently realigned his estate plan so that Sue will get about 83% of his estate and Tom is reduced to about 17%.

It is true that an estate planning attorney should always ask the client about any non-testamentary beneficiary designations, so that they can be properly reflected when writing the Will. But most people do not check back with their attorney a year later, or ten years later, when changing banking arrangements. The attorney cannot modify the Will if unaware that Dad has made banking changes that affect the distribution of assets.

Here is the take-away: anytime you sign an account agreement with your bank, broker, insurance agent, or other financial institution the terms of that agreement (or beneficiary designation) can contradict and override your Will. Banks favor accounts with rights of survivorship or pay-on-death designations because they know exactly who to pay, and thus avoid potential liability. They do not think broadly about an overall estate distribution or whether the arrangement on this account is going to contradict the Will.

Often, rights of survivorship are completely appropriate. If a married couple has a joint account and desire that it pass to the survivor, this is a great method. If an individual has two adult children and desires for them to split the account 50/50 they can both be listed (either with survivorship rights or as pay-on-death beneficiaries). But when the accountholder does not think broadly about distribution, it is very easy to misdirect assets – as happened in the Dad/Sue/Tom example above, and as happened with your father, you and your sibling.

Always consider the effect that adding people to your account may have on the ultimate distribution of your assets. If you suspect that you may be contradicting your Will, talk to your attorney. Paying attention to these details can avoid anger, disappointment and discord in your family.

Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.

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