Chapter 3: Lots of Little "Wills"
Your Guide to Will Substitutes

Darren and Samantha are newlyweds, each of whom has grown children from a previous marriage. They decide to buy a house together and take title to the house in joint tenancy with right of survivorship making them co-owners.

After unpacking the last boxes, the happy couple decides to complete the remaking of their lives and rewrite their wills. Both of them want their assets to go to their own children from their first marriages. So each writes a basic will that leaves everything to his or her own children. Samantha's daughter, Tabitha, who is living in a tiny apartment with her husband and kids, will get Darren and Samantha's house when Samantha dies; Darren's children, who have nice homes already, will get the rest of the couple's assets. And a few years later, Samantha dies, content because she believes she has provided for her daughter and her family.

This story does not have a happy ending, but it might have had she read this chapter.

Samantha will never know that her estate plan failed to accomplish the one thing she wanted most: giving her house to her daughter. She didn't realize that the joint tenancy she and Darren created meant that ownership of the entire house passed to Darren at the moment of her death, regardless of what her will said. She never knew that Darren was later beset by several costly illnesses and had to sell the house. His children--not hers--received what was left when Darren died two years later.

A prenuptial agreement (a signed contract between Darren and Samantha) would have prevented this, as would holding the house in another form of tenancy. (See chapters 14 and 15 for more on prenuptial agreements.)

A Will Isn't Enough

Unfortunately, this situation is familiar to many estate lawyers. Too many people don't understand that there's more to estate planning than writing a will.

Property That Does Not Pass Via a Will

• property held in joint tenancy (see chapter 5)
• life insurance payable to a named beneficiary
• property held in a trust
• retirement plans payable to named beneficiaries, including IRAs, Keogh accounts, and pensions
• bank accounts payable to named beneficiaries upon the death of the depositor
• transfer-on-death stock accounts payable to a named beneficiary
• some community property
• income savings plans

A will is usually the most important document in planning your estate, but it doesn't cover everything. In the community property states (see the community property section of this chapter), your will can only control half of most marital assets. Other benefits not controlled by a will (or a trust being used as a will substitute) include IRAs, insurance policies, income savings plans, retirement plans and joint tenancy (some jurisdictions also have a special form of joint tenancy for married couples called tenancy by the entireties).

A good estate plan must coordinate these benefits your will. Using them well can give your beneficiaries money much more efficiently than a will can. Use them badly, like Samantha, and you can negate your estate plan and frustrate your wishes.

This chapter looks briefly at a number of the many ways you can transfer property. Two of the most common means, life insurance and joint tenancy, are examined in chapter 4 and chapter 5.