Property You Should Not Include in Your Will

Is there anything you should never put in your will? Certain types of property pass directly to your loved ones (your beneficiaries) outside of your will, and outside of the probate process. These types of property are assets that should be left off your will. Otherwise, you risk confusion and conflict among your loved ones, as well as delays while disputes are being sorted out.

But what actually happens if you leave a gift to someone in your will, yet that property already has a different beneficiary named outside of the will? For the types of property discussed below, the gift in your will is simply ineffective. In other words, don't make the common mistake of assuming that your will overrides all other gifts, because in these cases, it doesn't.

Example: Brandon names his daughter Emma as the beneficiary of his retirement account. Decades later, he writes a will that leaves his retirement account to his girlfriend Sophia. When he dies, the money in the retirement account will go to Emma, despite what his will says.

(There's an exception, though, if you live in the state of Washington. This exception is discussed further below.)

Never Put in Your Will: Assets That Pass Outside of Probate

The following assets pass to your beneficiaries outside of probate and outside of the will. So if you're writing a will, don't include these types of property.

Property With a Right of Survivorship

If you co-own property with someone in joint tenancy, tenancy by the entirety, or any other method of co-ownership that comes with the right survivorship, your share of that property automatically belongs to the surviving co-owner after you die.

If you make a will that leaves the property to someone other than your co-owner, what happens to that property will depend on whether you or your co-owner dies first.

Example: Brandon co-owns his home with Sophia as joint tenants with right of survivorship (also called "joint tenants WROS"). In his will, he leaves the home to his daughter Emma, while Sophia, in her own will, leaves the home to her sister Abby. When Brandon dies before Sophia does, Sophia automatically owns the entire home because she has the right of survivorship. When Sophia dies, her sister Abby inherits the entire home under Sophia's will. (But note that if Sophia died before Brandon, Brandon would automatically own the entire home. And when Brandon dies, Emma would inherit the entire home under Brandon's will.)

There are other ways to co-own property that do not include the right of survivorship. For example, if you co-own property with someone as tenants in common (which does not come with a right of survivorship), you are free to leave your share of that property to someone else in your will. You can also convert one type of property to another; consult an estate planning lawyer to find out more.

Property You Place in a Trust

Property you place in a trust passes automatically to the beneficiary named in the trust document. You can't then use a will to give away this same property. This general rule applies to all trust property, including property placed in a revocable living trust—a common alternative to a will.

Property for Which You've Already Named a Beneficiary

There are many ways to pass property without a will or trust. You shouldn't include the following assets in your will:

• Money in a payable-on-death bank (POD) account. This means money in an account for which you've designated a beneficiary. If you want to change the beneficiary, contact the financial institution to do so.
• Property held in transfer-on-death (TOD) form. Some types of property can be owned in "transfer-on-death" form, which, like POD accounts, means that a beneficiary has been named for the property. Stocks and bonds can be held in TOD form, and in many states, real estate and vehicles as well. To change the beneficiary, you'll need to make a new beneficiary form, deed, or title document as applicable.
• Proceeds of a life insurance or annuity policy for which you've named a beneficiary. To make changes, contact the insurance company.
• Money in a pension plan, individual retirement account (IRA), 401(k) plan, or other retirement plan. With retirement accounts, changing the beneficiary involves following the process set out by the account administrator.

Exception for Washington Residents

If you live in the state of Washington, the general rules discussed above don't always apply. Washington has enacted a law (called a "superwill statute" because it gives wills more clout) that allows you to leave a few types of non-probate property in your will. These include:

• your share of joint tenancy bank accounts (but not joint tenancy real estate)
• payable-on-death bank accounts
• transfer-on-death securities or security accounts, and
• property in a living trust.

(See Wash. Rev. Code § 11.11.020.) With these types of property, gifts in a will might override the beneficiary designations made outside of the will. A court would need to consider factors such as how specific the will maker was when describing the gift.

But don't leave it to chance. It's best not to leave inconsistencies between your will and your other beneficiary designations.

Think Twice Before Putting These in Your Will

Aside from the non-probate property discussed above, you might also want to reconsider putting the following in your will.

Conditional Gifts or Bequests

When you leave gifts in your will, you might be tempted to place conditions on those gifts. Some people like the idea of giving gifts with strings attached—such as leaving money to your grandchild only if they quit smoking. While this might give you some comfort as a way of exerting some control from beyond the grave, it can come with logistical challenges and unexpected expenses. For example, how long do they need to have stopped smoking before they're considered to have quit? Who is going to oversee whether they've quit? Who is going to manage the money until then?

Any Property You Don't Want Tied Up in Probate

The probate process can be expensive and time-consuming, and can leave your inheritors with a little less in their inheritance after all is said and done. This is why many people take pains to avoid probate, especially with their most high-value assets.

For example, yes, you can leave a house in a will, but a home is usually one of your most significant assets. Tying it up in probate can cost a significant amount of money, not to mention headaches during the time that its next owner doesn't yet have legal title to it. With real estate, there are some probate-avoidance tools you can explore, such as transfer-on-death deeds (available in more than half of the states) and living trusts. Some advance planning can go a long way.

Gifts to Those Who Can't Manage the Money

If you want to leave money to someone who has problems managing money, don't do so through your will. Instead, you can use a spendthrift trust, which protects the money from being squandered all at once. Similarly, special devices such as special needs trusts can help you provide for a loved one who has a disability without disqualifying them from government benefits.

On the other hand, you can leave property to a minor in your will. You'll just need to arrange for someone to manage the property until the child becomes an adult. There are several ways to arrange property management for a child.

Additional Help

If you're still uncertain about what to include in a will and what not to include, get the help of a local estate planning attorney. Or consider using WillMaker, which helps you create your own, legally valid will.