Does a last will and testament have to list all of your assets? Many of my clients believe that a Will must list all of their assets—who gets the house, who gets this bank account, this stock, etc.

A Will is a document that controls the disposition of a person’s assets and nominates a person, called the executor, to manage his finances after he dies. A condition precedent to a Will being effective is the death of the person who drafted the Will, called the “testator.”  For instance, Mr. Smith drafts a Will through which he nominates his son Joseph as the executor of his estate and leaves his entire estate to his four children, including Joseph, on an equal basis.

Mr. Smith’s Will is ineffective while he is alive. Mr. Smith is free at any time to revoke his Will and make a new Will … or not make a new Will. Mr. Smith might make several Wills while he is alive. Only the last Will that he drafts before he dies will be his legally effective Will. For this reason, a Will is called a “last Will” because it is the last will that Mr. Smith drafted. By his death, Mr. Smith makes his last Will an effective document.

I say that Mr. Smith nominated his son Joseph to be his executor in his Will. I did not say that Mr. Smith appointed Joseph to be his executor. In a Will, a person nominates someone—their spouse, a child—to be their executor. Once a person dies, the person nominated as the executor submits the Will to probate before the surrogate of the county in which the decedent died domiciled. The surrogate—an elected, county official—appoints the nominated executor. Once the surrogate appoints the executor, the executor is free to deal with the assets of the decedent according to the terms of the Will.

A Will does not necessarily control all of a person’s property. Let us assume that Mr. Smith owns the following assets:  a house worth $400,000; a brokerage account worth $200,000; an IRA worth $100,000; a life insurance policy with a $100,000 death benefit; several individual stocks; and a several bank accounts. Mr. Smith wants his entire estate to pass to his four children equally, but will it? That depends on several factors.

Mr. Smith may have named his son Joseph as the beneficiary of his IRA and life insurance policy. Mr. Smith thought that by naming Joseph as the sole beneficiary, he was enabling Joseph to ensure that these assets were distributed to all of his children equally; however, by naming only Joseph as the beneficiary of these assets, Joseph will own these assets after Mr. Smith dies. Joseph may choose to share these assets with his siblings, but the assets belong to Joseph because he was the named beneficiary, and he has no legal obligation to share those assets with his siblings.

Even if Mr. Smith said in his Will that he wanted his IRA and life insurance to go to his four children equally, his designated beneficiary (Joseph) would take precedence over the terms of his Will. The beneficiary designation controls these assets.

Mr. Smith may have named his daughter Mary as a co-owner of his bank accounts. During his life, Mary helped Mr. Smith write his checks, so he wanted Mary to have access to the bank accounts if something happened to him. When Mr. Smith died, the bank accounts would pass to Mary as the surviving joint owner. The other children could argue that this was not Mr. Smith’s intent—for Mary to receive all the money in the bank accounts—but under New Jersey banking law, the bank accounts will pass to Mary.

Mr. Smith’s house and individual stocks will pass to his four children under the terms of the Will. If the brokerage account does not have a beneficiary designation, that, too, will pass to his four children under the terms of the Will. In the end, a significant part of Mr. Smith’s Will (his IRA, life insurance, and bank accounts) will pass outside the terms of his Will.

This was not Mr. Smith’s intent or his belief. He thought his estate would go to his children equally. Now, if all the siblings get along and “do the right thing,” then there will be no issue. But people do not always do the right thing, and Mr. Smith did not have a Will drafted so that his children would have to do the right thing. You need to be aware of how your property passes when you die.