Having a Last Will and Testament is not the be-all and end-all for most estate plans. In order to have a proper estate plan, you must know how your assets are titled, and you must coordinate the manner in which your assets are titled with the provisions of your Will. Typically, a person has their Last Will and Testament drafted to read something such as the following: “I give, devise, and bequeath my entire estate to my spouse,” or “to my children, equally,” or “to my brother.”

When a person dies, their property passes in one of three ways: “by operation of law,” “by contract,” or “as part of their probate estate.”  Only property that passes as part of the testator’s probate estate passes in accordance with the terms of the testator’s Will. It is entirely possible that a testator’s estate could pass in a manner that bears no relation to the dispositive provisions of his Will.

For example, assume the following hypothetical:  Mr. Smith has a Will drafted through which he leaves his entire estate to his three children, equally. Mr. Smith’s estate consists of the following assets: a house that he owns jointly with his girlfriend, Ms. Jones, as joint tenants with rights of survivorship; a bank account that he owns jointly with his brother, and a 401(k) plan, with his ex-wife named as the beneficiary. Mr. Smith divorced a year ago, but he neglected to change the beneficiary designation on his 401(k) plan at the time of his death. Mr. Smith’s entire estate is worth $600,000.

Given these facts, Mr. Smith’s children will not receive one dime from their father’s estate, notwithstanding the fact that he died with $600,000 of assets. The house that he owned jointly with his girlfriend will pass to the girlfriend “by operation of law.”  Mr. Smith and the girlfriend owned the house as “joint tenants with rights of survivorship.” That means that when one of the joint tenants dies, the other joint tenant will own the entire house.

As for the bank account, the account will pass to Mr. Smith’s brother.  This is true irrespective of whether or not the brother made any contributions to the account. Mr. Smith and the brother own the bank account as joint tenants with rights of survivorship; this is the typical form of ownership for accounts held at financial institutions. When Mr. Smith died, his interest in the account passed automatically to the survivor, his brother.

A bank account is an example of property passing “by operation of law” and “by contract,” because the terms of the account, the contract, would, in all likelihood, specify rights of survivorship and a New Jersey statute directs that joint bank accounts pass to the survivor.

Finally, there is the 401(k) plan, with the ex-wife named as the designated beneficiary. Certainly, you would think that the ex-wife would not take the proceeds of the 401(k) account over the children who Mr. Smith has named in his Will. To make the hypothetical even more dire, assume that Mr. Smith had been married twice in his life and that the children are not the children of the ex-wife who is named as the beneficiary of the 401(k) plan.

Yet, the fact of the matter is, the ex-wife will take the 401(k) plan. Mr. Smith may have specifically directed in his Will that “my children are to receive my 401(k) plan with XYZ Corporation.”  This would not matter. Mr. Smith’s designated beneficiary is his ex-wife, and that is the person who will take the plan. This is an example of property passing “by contract.”

As stated, property that does not pass “by operation of law” or “by contract” passes as part of a person’s probate estate. Probate property goes to the beneficiaries named under a testator’s Will, or if a person dies without a Will, in which case they are said to have died “intestate,” their property passes according to the intestate succession statute.

The important thing to remember is that you need to coordinate the manner in which your assets are titled with the provisions of your Will. Joint accounts and beneficiary designations can cause your estate plan to become skewed in favor of one person.

When children are involved, you may believe that the child who holds the account with you jointly or is named as the beneficiary of your retirement plan, will share the asset with the other children, but he or she has no obligation to share. And, compelling that child to comply with your wishes could cost your estate tens of thousands of dollars in legal fees.