The way you hold title to your assets is key to any comprehensive estate plan.
The greatest Will in the world is going to be ineffective if you have survivorship assets, IRAs or life insurance benefits going to people you don’t want them going to. In short, how you own your property determines where it goes when you die. Additionally, how you own your property can affect how it is used if you become disabled.
There are many different ways to own property. You can:
- own it outright, solely in your own name (these assets pass by your Will);
- own it outright with another as joint tenants in common (your share of these assets pass by your Will);
- own it outright with a spouse (this asset passes to your spouse on death regardless of what your Will says);
- own it outright with another as joint tenants with rights of survivorship (this asset passes to the other person on death regardless of what your Will says);
- own it outright, but have it be payable on death to another. This includes: Life Insurance, Annuities, Retirement Accounts, 529 Accounts and POD Accounts or TOD Accounts. (These assets pass to the named beneficiary regardless of what your Will says.);
- own it through a business (Many businesses that are owned with other parties will have an agreement that says where the business will go when you die. Accordingly, this will trump what you have in your Will.);
- own it through a revocable living trust (Assets in the trust will usually pass according to the terms of the trust);
- be a beneficiary of a trust (Assets in the trust will usually pass according to the terms of the trust – but this trust was not a trust established by you, so you may not have control over where it goes); and
- be a third party beneficiary. (This is basically a trust without a written trust document. This scenario often occurs when there is a contract between two people that benefits a third party. For example, a divorce agreement between a husband and wife might require the husband to leave $100,000 to his children. This will trump whatever the husband puts in his Will if rights a Will cutting out his children.)
A good estate planning attorney will make sure to review the title of all of your assets. By doing so, he can help you:
- ensure that your money goes where you want it to go;
- advise changes that should be made to the title of assets (particularly for married couples) to maximize estate tax exemptions and minimize taxes;
- avoid the risk of litigation; and
- reduce probate costs.