One of the most common misconceptions that I run into with clients is a misunderstanding about the importance of asset titling and the types of assets that are not governed by a Last Will and Testament.
Assets that name a surviving joint tenant or designate a beneficiary (i.e. 401(k), IRA, life insurance, bank account) are not governed by a Last Will and Testament. The only assets that are governed by a Last Will and Testament are those assets that are titled solely in the decedent's name and do not designate a beneficiary. Therefore, if Mom lists her oldest child as a joint tenant on her residence and designates him or her as a beneficiary on her IRA to "avoid probate", her house and IRA will pass solely to her oldest child even if her Last Will and Testament names all three of her children. In this scenario, even if the oldest child decides to honor Mom's wishes and divide the house and IRA with his or her two siblings, there are tax ramifications. In most cases, the oldest child will simply take the distribution of the house and IRA. Unfortunately, this usually results in permanent damage to family relationships, which is not what Mom wanted.
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