Let’s say your mom is a successful real estate mogul who lives in Boca Raton with all her wealth wrapped up in her company. BIG retirement account. Not worried about an inheritance? How about your dad: maybe he’s a wealthy deal maker who lives on the ocean in Delray Beach, Florida. (Huge joint account at a Palm Beach trust company). They are divorced but they each remarried. They love you, right? No chance to be cut out of the Palm Beach will, right? (You’ve even seen the Palm Beach will and the revocable trust. You inherit. ) And you gave them grandchildren.
But accidents do happen. If all of your parent’s wealth is in one asset, wouldn’t you be careful with it? Make sure it’s in sync with your Palm Beach estate plan, right? But take your eye off the ball and you may end up dis-inheriting someone without intending to do so. Palm Beach estate beneficiaries and family members beware:
That’s what can happen with life insurance, retirement accounts and Palm Beach joint accounts. In Palm Beach, many heirs and estate beneficiaries know about “will substitutes“. These are the “probate avoiders“: assets which go automatically, by operation of Florida property law, to a named beneficiary or recipient. They don’t go through Palm Beach probate because they are not part of the estate. A recent column by Jason Zweig of the Wall Street Journal, www.wsj.com, chronicles what can happen when death occurs unexpectedly and when you don’t plan ahead. Family members, including adult children, will want to read his column, particularly if your mom or dad is on their 2nd or 3rd marriage— and if there’s lots of $$ you were counting on. You just may get dis-inherited accidently.
Wealthy Dad Dishinerits Kids: No Spousal Waiver, No Beneficiary Form
- A Wealthy executive had a will which left everything to his adult children (you can do this in Florida, but you can’t dis-inherit your spouse unless they consent in writing: like with a Palm Beach prenup)
- This Last Will shows an intent to leave an inheritance to his children
- But most of his $$ was in his retirement account, a 401(k) (remember Florida probate law: Florida wills don’t distribute retirement accounts since there’s a beneficiary form. Palm Beach probates don’t apply to joint accounts and beneficiary designations).
- He died un-expectedly
- His 2 month old marriage : evidently NO prenup
- His wife of 2 months evdiently did not SIGN A WAIVER to the 401(k)
- His wife made a widow’s or surviving spouse claim to the retirement account based on federal law which gives spouses property rights to 401(k)s (In Florida, there are also Florida law estatesrights for widows and surviving spouses which you have to address and plan for: Florida elective share and Florida pretermitted spouse, and valuable Palm Beach homestead rights)
How Family Can Save Their Inheritance
- Here are some suggestions for adult Palm Beach and Florida estate beneficiaries who don’t want to get dis-inherited or cut out of family wealth
- Talk to your mom or dad before they re-marry
- Suggest a Florida prenuptial agreement to limit what the new spouse gets if mom or dad dies un-expectedly, or they divorce
- Suggest a waiver of the new spouse’s rights to your parent’s Palm Beach retirement account (there are simple waiver documents which the 401(k) or retirement plan company have: you don’t even need a Palm Beach probate lawyer!)
- If they marry without any of the above, ask your parent to put you on the retirement account but have the new spouse sign off
- Alternative inheritance: have dad or mom take out a new life insurance policy which names you sole beneficiary, which Dad or Mom pre-pays. You should be the life insurance policy owner, too
Most Popular Palm Beach Will Substitutes
- Life insurance proceeds
- 401(k)s
- IRAs, annuities
- pay-on-death accounts
- joint accounts with rights of survivorship
What Can an Heir or Adult Child Do To Save Your Inheritance ?
- Talk to your mom or dad
- Sit them down with your info or a Palm Beach estate lawyer
- Explain will substitutes and Florida property law
- Describe who inherits today if your mom or dad died unexpectedly (explain who inherits the Delray Beach homestead or the joint account in a Boca Raton bank)
- Propose solutions: a Florida trust for you and your parent’s grandchildren, a change of beneficiary form, a new life insurance policy for you
- Follow through: but remember: asking for a Palm Beach inheritance is OK, asking for $$$ from a Florida trust or will substitute is acceptable. But no pressure. No ugly language.
How to Sell It
Remember: if you have kids, these are your parent’s grandchildren: his or her HEIRS and descendants. The next generation. He or she needs to protect them financially.
Here’s the link if you would like to read Jason Zweig’s Wall Street Journal Article: http://blogs.wsj.com/moneybeat/2014/04/04/when-your-401k-has-a-bad-heir-day/?mod=WSJ_hps_MIDDLE_Video_second