Once you have executed your estate planning documents, it is important to remember that the process is incomplete until you confirm how your assets are titled. Your estate planning documents cover a lot of information and give directions about how your estate should be distributed. If, however, your assets are not properly titled, or beneficiary designations are not properly completed, your estate may not pass as you intended.
There exists a wide range of choices for titling your assets, from financial to real estate, all of which serve different purposes. It is up to you to identify your assets during the estate planning process. It is up to your attorney to discuss and explain the impact different titling options will have on the disposition of various assets at your death.
For instance, if you own a mutual fund in your individual name, that account would be distributed as directed by the terms of your will and the probate process. If you owned the same account in the name of your trust, the account would be distributed as directed by the terms of your trust without the need for probate. Contrast this with the option of owning the account jointly with another person (most often as “joint tenants with rights of survivorship”), which makes the terms of your estate plan irrelevant as to the account since it will transfer automatically upon your death to the surviving joint owner. How you hold title to your mutual fund should take into account both to whom and how you want the asset to pass upon your death.
Dealing with retirement accounts and life insurance policies is equally important, but requires a few different considerations. Their distribution upon your death is generally controlled by beneficiary designation forms and their value can pass directly to an individual, to a trust, or to a combination of beneficiaries. A key fact is that the beneficiary designation form, alone, controls distribution of the assets. Other legal documents do not affect the beneficiary designation and it does not automatically update for life changes like divorce, or even changing brokerage houses. If you divorce and leave your ex-spouse as a designated beneficiary, s/he will receive the funds upon your death regardless of the fact you are no longer married. If you move accounts to a new brokerage house (ie: you want to follow your broker from one financial firm to another), you must update beneficiary designation forms for the new accounts at the new brokerage house. Otherwise, those accounts will lack valid beneficiary designations and the assets will pass via intestacy or the terms of your will, necessitating probate proceedings.
How you want your assets to pass is entirely up to you. Just remember that making sure your choices are carried out means making sure your assets are titled the “right” way. If you would like to review your estate plan and whether your asset ownership truly reflects your goals and desires, contact Kling Law Offices today for a complimentary consultation.