Thursday, August 03, 2017 9:50 AM
Recently we announced Filbrandt Private Trust as an expansion of our trust services. Over the years, we’ve observed one of the most common estate planning mistakes people make is actually quite simple. Perhaps so simple that it is overlooked. Very often, people don’t check to ensure that their assets are titled properly so they match your documents. Without correct titling, there is no guarantee the assets will be distributed as outlined in your will or trust.
This may explain why many estate planning attorneys spend as much or more time handling family settlements after death than actually planning. With all the complexities of property law, tax law, fiduciary responsibilities, the choice of executor and trustee, and investment management, having the root of the plan disconnected by a gap in titling is unfortunate.
Personal assets, such as bank and investment accounts or real estate, can be titled in a myriad of ways. How you own these assets—by yourself, with your spouse, in a trust, etc.—has significant impacts on your estate plan and asset disposition.
Assets owned with your spouse bypass the provisions of your estate plan, as full ownership interest is transferred to the surviving spouse. This may potentially expose the assets to creditors or reduce the assets available for beneficiaries in your will or trust.
Another misunderstood feature of titling is whether assets pass through probate. Probate means “proof” and is the process of a court proving the wishes of the decedent by validating his or her will. Many people think probate applies only when there is no valid will, but in fact everything passing under the terms of the will goes through probate.
Generally, the assets in any retirement account, life insurance policy, or annuity will pass to the beneficiary named on that asset, regardless of the terms of a will. Therefore, will or trust beneficiary designations that match the beneficiary named on the retirement plan document is a critical part of an overall estate plan. Many people make the mistake of having outdated beneficiaries on some accounts that do not match those in their will, which can create conflicts among beneficiaries that may become a matter for the courts.
The action steps to avoid problems for your beneficiaries and heirs are:
- Updating your will and-or trust is the first step in creating a solid estate plan, but it’s not enough.
- Check your retirement plan documents and make sure the beneficiaries named in those documents exactly match those in your will or trust;
- Make any needed changes to either set of documents;
- Retitle any asset jointly owned with your spouse that you want to pass directly to someone besides your surviving spouse;
- Make sure the retitled asset is correctly referred to in your trust or will.
While you can attempt to do it yourself, the best strategy is to have professionals conduct an estate plan audit, which shows you how close (or not) you are to achieving your estate transfer objectives. This important task could potentially have effects on the people you love and care about the most.
Filbrandt Private Trust is available to answer any estate planning questions you may have. Contact us at 800-431-9740.
The information provided is not, nor is it intended to be, legal advice. You should consult your attorney for advice regarding your individual circumstances.
Circular 230 Disclosure
We are required by Treasury Regulations (Circular 230) to inform the readers of this material that, to the extent that the information contained herein concerns federal or state tax issues, such information was not written or intended to be used, an cannot be used, for (1) avoiding federal or state tax penalties or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein.