Why Leaving Assets Outright to a Beneficiary Can Backfire

Last will and testamentThe cornerstone of many estate plans is the last will and testament. Your will provides you with the chance to make sure that your assets are distributed to the particular beneficiaries you name. Your will is your best chance to tell the probate court exactly how you want your estate handled. Many people think of the will as just a list of which beneficiaries will receive which assets. With this method, the asset will simply be distributed directly to your chosen beneficiaries at the conclusion of the probate process.  While this is definitely one way that you can distribute your assets, making specific bequests directly in your will can backfire.

One way granting assets directly to your beneficiary can backfire is if your beneficiary is the recipient of particular benefits from the government. Medicaid, veteran’s assistance, and SSI are all need-based programs that do not allow the recipient to have more than a set amount of assets to be eligible. Making a lump-sum gift to a loved one who receives these types of benefits can mean that he or she no longer can receive the necessary benefits until the gift has been spent.

Another way it can backfire is if you give the asset outright to one person with the expectation it will be used in a specific way or for a specific person. For example, if you give a large amount of cash to your child with the expectation it will be used for your grandchild’s education, without additional estate planning tools in place, your son would have no obligation to use the assets in that way.  Similarly, leaving money to an ex-spouse with the hope the money will be used to benefit your child would also not be binding without additional restrictions in place.

Finally, leaving these gifts outright can create resentment between family members. Wills are public record, and anyone in your family can obtain a copy by simply going to court.  Leaving specific gifts through wills could mean a rift is created in the family if one member is angry at certain gifts being made.

We have extensive experience helping clients navigate estate planning issues of all sorts. Call us today at (651) 371-9117 and let us help you.