Common Misconceptions about Wills

One of the biggest misconceptions about a Will is that it avoids the probate court system. The other common misconception is that whatever you write in your Will determines how ALL of your assets will be distributed when you die. In order to understand why neither of these statements are true, you first need to understand probate and probate assets.

What is Probate?

Simply put, probate is the legal process to change ownership or title on any individually-owned assets after you die. For example, if your home is owned in your own name when you die, the only way for someone to sell the house and determine who gets the proceeds from the sale would be to open a probate estate.

Probate Assets versus Non-Probate Assets:

• Probate assets: Assets that need to be probated would consist of those that are owned only in your name (with no joint owner) and either have no beneficiary listed or list a beneficiary who is a minor child. The best example of probate assets would be a home/property that is only owned in your own name, or an individual bank account that does not list a beneficiary upon your death.
• Non-probate assets: Assets mainly avoid probate for two reasons: (1) there is another owner on the asset; or (2) the asset has a named beneficiary(ies) over the age of eighteen.

Joint ownership is generally not recommended as an estate planning strategy (unless involving a married couple in certain circumstances), as there can be adverse tax consequences associated with adding owners on certain assets, as well as increased liability. Additionally, joint ownership only avoids probate for so long, because eventually when there are no living owners, then probate will be needed. The ownership interest also needs to be properly worded to avoid probate if the other owner dies.

Beneficiary designations as an estate planning strategy have their own issues as well. Beneficiaries need to be adults. Otherwise, the probate court will need to be involved to manage the asset for the minor beneficiary until the age of eighteen. Also, when you name a beneficiary to an asset, there is no comprehensive back-up plan when the beneficiary dies, considering that deceased beneficiary’s children or other wishes.

Now that we know the difference between probate and non-probate assets, we can address what a Will is and understand why a Will neither avoids probate nor controls all of your assets.

A Will Does NOT Control All of Your Assets:

If you died yesterday, any of your non-probate assets (jointly-owned assets and beneficiary designated items) would automatically be distributed to the other joint owner, or to those named beneficiaries (barring the issues discussed above with beneficiary designations) by operation of law. Those assets would NOT be probated and would NOT be controlled by a Will.

The Definition of a Will:

For assets that DO need to be probated, a Will is a document created by you that instructs the probate court as to WHO gets those assets, and HOW they will be distributed. A Will is also very important if you have minor children so that you can designate a guardian for them if you were to die before they became adults.

If you don’t have a Will, then at your death, the probate court distributes your probate assets based on Michigan law – called the law of intestacy. The problem is that Michigan law may distribute your probate assets in a much different manner than you would otherwise desire. The reason that people draft a Will is so they can choose the WHO and the HOW regarding the distribution of their probate assets and the guardian of their minor children.

Guardianship issues with a blended family can pose a huge problem in the absence of a Will. If you die in Michigan with no will, and you have children from a previous relationship, then (with some asset exceptions) Michigan law may end up disinheriting your own children unintentionally.

Why a Will Does Not Avoid Probate:

If you have a Will when you die, it STILL needs to be interpreted and approved by the probate court before most assets can be distributed to anyone. For example, if you died yesterday, no one could just walk into your bank with your Will and say, “The Will says that I get the money, so please empty the account and give it to me.” The bank requires letters of authority from the probate court approving and validating the Will.

A Will is simply a letter of instruction to the court, but it holds no power of its own without court interpretation and approval. Unfortunately, this “interpretation and approval” comes with an entire process in the probate court system, which can be very costly and time-consuming.

Hopefully this sheds some light on some basic misconceptions around probate and Wills. If you are wondering about alternative methods to control ALL your assets with ONE simple plan which AVOIDS the probate court system, our Firm would love to assist. We have competent and caring attorneys who will assess your specific estate planning goals and concerns and explain the best process to protect your legacy and avoid probate.