The Crux of Estate Planning is Titling of Assets (and Liabilities)
There are two basic secrets to having an estate plan that you understand, that makes life easier for your loved ones later and achieves your goals:
Secret #1: Hire the best professional advisors for you (attorney, CPA, insurance agent and financial advisors). But that will be the subject for another day.
Secret #2 Title your assets correctly in order to achieve your intended results.
Here are the basics rules you need to know:
- Assets owned in your sole name as of the date of your death, pass through the probate process after your death.
- Assets that are owned by you and one or more other as “joint tenants with the right of survivorship are automatically owned by the survivor(s) when one of the owners dies. (But check your state laws to determine if any/all of your interest in the joint property escapes the reach of your creditors after your death).
- Assets with a pay on Death or Transfer on Death beneficiary designation pass to such beneficiary upon your death. Each beneficiary usually has to file a claim for such benefits after you pass. The claim is processed by the financial institution holding the assets.
- Assets owned by a trust pass according to the terms of the trust. This method of transferring assets allows the owner/decedent the greatest number of options for control over the assets but many times requires the assistance of a qualified estate planning and administration attorney in order to navigate the path forward.
- If a trust exists for your benefit that was created for you by another person, then you might have been granted a “power of appointment” over all or some of the trust’s assets that remain at the time of your death whereby you can direct where those assets go after your death. In this case, you did not actually control the titling of the assets but you are granted control over how they pass at your death.
Awareness of how titling affects the enforceability of your Will or trust over your assets at your death should help you to prepare a flow chart of how the assets will pass at your death and give you an opportunity to do something about that flow if it does not match your intentions.
