Fredrick P. Niemann, Esq., a NJ Wills Attorney
Several years past, a husband died leaving a last will and testament with assets, one of which was a 401k. The marriage was a second marriage for her husband, who had two sons from his first marriage. While he was single he had changed the beneficiaries of his life insurance and 401k plan to his sons and had redone his will.
After his second marriage, the husband and his new wife bought a home together. They asked their real estate attorney, who handled the purchase for them, to draft a new will as well. The husband listed the assets he wanted to pass to his sons and which assets to his wife. The 401k he wanted to go to his wife. Unfortunately, the attorney didn’t understand the difference between probate and non-probate assets. So when she wrote a will that specifically left the 401k to the wife, she didn’t realize that the will would have no effect because the beneficiary designations on file with the custodian of the 401k plan listed the sons from the first marriage.
When her husband died, the wife received a big surprise when she was told that she had no interest in the $500,000 401(k). Why? Because a will doesn’t control the distribution of all your assets with beneficiary designation. Property such as life insurance, annuities and retirement accounts pass in accordance with whom you have designated on your beneficiary forms completed and filed with the life insurance and annuity companies or retirement account custodians. Other types of property pass by operation of law such as joint accounts with right of survivorship or real estate that is owned jointly by a husband and wife. When the first owner dies, the property automatically passes to the surviving spouse. It is irrelevant what the will says.
That is what happened here. A 401k is contract property so it passes according to the beneficiary designation form on file, not by the terms of the will. The wife tried unsuccessfully to get a court order directing the funds be paid to her. She did however recover about half of the account balance in a litigation settlement, less fees and costs.
The purpose of the post is that although many people think drafting a will is simple and often undertake to do it themselves with a “will kit” with legal zoom or some other legal form or ask an attorney to do a “simple will”, they may miss important steps that must be taken that can save a lot of heartache and money.
To learn about these and other elder law issues, go to www.hnwlaw.com/ or www.njwillsattorney.net or contact Fredrick P. Niemann, Esq. toll-free at (888) 800-7442 or by e-mail at fniemann@hnlawfirm.com/. For further information, go to http://www.youtube.com/user/NJElderLawCenter#p/search/1/8be14yDEeJc to learn more.