Who gets your IRA when you pass away – assuming there's still money in it? Who will get your house? Your life insurance payout? Your 401(k)?

The answer could be different from what you think.

An Example

Your will says that your daughter gets all these things. That's how you want all your worldly good to be distributed, so you think everything is fine.

What you forgot is that, twenty years ago when you were still married, you named your (now) ex-husband as the beneficiary of your IRA and your insurance policy.

Guess what? If you die tomorrow, he gets the IRA and the life insurance – not your daughter.

Your other assets might not go to her either.

• If you own your house as joints tenants with right of survivorship with your mother (and she's still alive when you pass away), your mom will get the house – not your daughter.
• If you named your sister as "Payable on death" (POD) when you opened a mutual fund account, because your daughter was just a kid at the time, your sister will get the mutual fund account – not your daughter.

How Things Really Work

When most of us think about how our assets get passed on to our loved ones, we think of a will. But in reality, a will only controls assets that aren't transferred by some other mechanism, such as a beneficiary statement, a trust, or joint ownership. You could say that wills are second bananas – they only deal with what's left over.

You owe it to yourself and to your intended heirs to check how your accounts and assets are titled. And to be sure that all of your estate planning documents form a coordinated plan, rather than being in conflict with each other.

Components of an Estate Plan

There are many tools that might make up your estate plan:

• Beneficiary designations are used on IRAs, 401(k)s and other employer retirement accounts, and life insurance policies.
• Payble on Dealth (POD) designations are used on non-retirement accounts, such as bank, brokerage, and mutual fund accounts. You may not be able to name someone as POD if you own the account jointly with someone else.
• Transfer on Death (TOD) designations can be used in some states for non-financial assets, such as real property or automobiles.
• Joint tenancy with right of survivorship can be used on financial accounts as well as real property and automobiles.
• A trust document says who can make decisions about the assets in the trust if you can't, and who will receive the assets. The trust only controls assets that have been re-titled in the name of the trust.
• A will states who you want to get everything else, who you want to serve as the executor of your estate, and who you want to be the custodian for your minor children.
• A power of attorney (POA) lets you designate someone to act in your place, during your lifetime when you are unable to manage things yourself. There are two types of Powers of Attorney - for property and for healthcare. Each state has statutory forms that you can fill out on your own, without an attorney. However, if you're having an attorney draw up your will or a trust, you may want them to do the POA as well.

Making Changes

Here's the good news. Changing beneficiaries and POD and TOD designations is usually easy. Verify the current beneficiary or POD designation with the retirement plan custodian, insurance company, bank, brokerage, or mutual fund company to find out who you have named, if anyone. If you need to change it, just fill out new forms.

You can also change your Power of Attorney, by completing a new form.

Drafting or changing a will or a trust normally requires an attorney. Look for one who specializes in estate planning.

While you can do many of these things yourself, you may need the help of an attorney. Estate planning is a complicated area! Each person's situation is different, and laws vary by state. My purpose in writing this post is to provide educational information and motivate you to work on your plan. It's up to you and your attorney to decide what steps to take, so that you get the result you want.