Avoid Probate Court: Name a Beneficiary

By Ted David
Guest Column

There is an old song from 1944 entitled “Into Each Life Some Rain Must Fall.” More than just a song, it is a truth that each of us, at some point in our lives, will face some unpleasant or perhaps even devastating event. For many people, no such event can be more devastating than the death of a loved one. Often, that death is accompanied by complications of a financial nature.

My story began with a call informing my wife and me of the death of our 36- year-old son in June, 2021. A resident of Maryland, he worked in Washington, DC and died in a car accident near his home. We were devastated. Compounding our sadness was the ordeal that followed.

It turns out, his employer’s human resources department was remiss when he was on-boarded. At no time during the hiring process, when filling out the paperwork, was my son ever asked to name beneficiaries for his 401(k) plan, his stock options plan, or his life insurance policies. Because no beneficiaries were listed, when it came time for the company to disburse these funds, under these most unpleasant circumstances surrounding his death, his mother and I were in a predicament — along with his company.

Absent the naming of beneficiaries, and because he was single and childless, it was unclear who the beneficiaries of his accounts would be. Considering there was life and accident insurance in place, these sums would be substantial.

It was only as a result of the kindness and goodwill of his managers, along with careful and detailed record-keeping by us, that we were able to bypass the unpleasant process of probating his will in Maryland, reputed to be one of the most difficult states in which to do that. Fortunately, at our insistence, our son had a will in place that named his mother and me as co-executors as well as his beneficiaries.

A will isn’t always enough

However, for the company that managed his retirement plans and for the companies that oversaw his life insurance, this might not have been enough, as they needed proof of our relationship with each other and with him. To that end, we did provide each with a copy of both our son’s birth and death certificates, on which my wife and I were named, along with a copy of our marriage certificate.. On top of that, we also turned over government-issued photo IDs of ourselves and our son. All of this took time, but it satisfied their requirements.

Armed with all these documents, we sent them to the human resources department of his company. Because our son was very well liked by management and because of the tragedy of his untimely death, human resources recommended the funds in all of his accounts be disbursed to my wife and me on a 50-50 basis.

But there was a condition: The insurance company and the brokerage all had to agree to the plan. Had they not agreed, my wife and I would’ve had to go through probate, which we desperately hoped to avoid. (Maryland’s system is so arcane that the actual body which oversees the probate of wills is called “The Orphans Court” as though it were something out of a Dickens novel.)

In the end, thanks to the goodwill we demonstrated, along with the documentation we provided them, a very wise and compassionate HR department and the very generous people in charge at the various insurance companies and brokerages released the funds to my wife and me with no further questions asked.

A lesson to be learned

There is a lesson here, and that is to be sure that each and every account you have names a beneficiary, starting with your bank account and extending to your retirement accounts, insurance policies – anything that has your assets tied to it. In the event of your demise, the money will automatically pass “outside the will” to the beneficiary.

Assuming a beneficiary is named, the proceeds of the account will go to the beneficiary with no need for probate. This is critical because probate costs money — in many places it requires an attorney, and it is often a protracted process which is not only time-consuming, but virtually a continuous poke in the very sore spots that rise up after the death of a precious loved one.

Do not delay. Our son would never have imagined how short his life would be.

In most cases, if you are married, your spouse will be your primary beneficiary and then you can name contingent beneficiaries in the event your spouse is not alive at the time of your demise or if you and your spouse pass at the same time.

In addition, if you own real property, if the property is titled correctly, that too can pass “outside the will.” Real property should be titled if owned with someone else, as “joint tenants with right of survivorship” or JTROS. This means if either of you passes, the other person gains 100% ownership of the property with no need to probate a will. In general, avoiding probate is the goal of any and all of your estate planning.

There are certainly going to be situations where more sophisticated estate planning is required and where an attorney will be needed, to create a trust, for example. However, in most cases you, on your own, following these guidelines, can avoid probate and be sure that your assets are distributed to those who you wish to have them without legal complications.