19 Mar How will my assets go to my adult children when I die?

Q. I am a single mother with three adult children who are 28, 26 and 19. I have life insurance and a retirement account, and my kids are the beneficiaries. I had a will drawn up to give graduated payouts to my children at certain ages, with a trustee in charge. How does this work when I die? The bank said the will is correct.
— Mom

A. There are several issues to understand.

It seems your will and your beneficiary designations may be working against each other.

When it comes to estate planning, there are two roles that you should know, and they’re often confused. The terms are executor and trustee.

The executor is the person, usually one, who is tasked at executing the will, said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn.

He said this person will probate your will, distribute funds to beneficiaries and file your final tax return.

The trustee is a person, or persons, or a bank or an attorney, responsible for the assets within a trust, he said.

The executor and the trustee do not have to be the same person.

Scheibner said in your case, you may wish to speak with an estate planning attorney, as the bank may be giving you incomplete information.

It’s also important to note that any beneficiaries listed on life insurance policies or retirement accounts supersedes the wishes of the will.

“In your example, when you pass away, your children would be entitled to their portion of the life insurance and retirement accounts immediately, as they are listed as primary beneficiaries,” he said.

If you wish to stagger the payments, as per your will, you need to establish a trust, he said.

“A trust does not need to be opened while you are alive,” he said. “It can be established once you pass away, if directed in your will.”

The trust, once established, will have a tax ID number, and you can make the primary beneficiary on your life insurance and retirement accounts the trust or the estate, whichever your estate planning attorney recommends, he said.

“The trustee will then follow the rules of the trust, as per your wishes, and distribute the funds as per your instructions,” he said.

Now, you said your bank said the “will is correct.”

But because your children are listed on the beneficiaries on the life insurance and retirement accounts, those accounts will go directly to them without the need to go through probate, which means following the instructions of the will, Scheibner said.

Talk to your estate planner to set up the correct documents and speak with your financial advisor to ensure your listed beneficiaries are still the person or persons you desire.

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This story was originally published March 19, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.