Even if your financial life is pretty simple, you should have a Last Will and Testament. However, once that is signed, there’s usually more work to be done.
You need to consider how assets are titled and what your account beneficiary designations instruct. Assets must be properly titled so that assets are distributed as intended upon death.
Forbes’ recent article, “For Estate Plan To Work As Intended, Assets Must Be Properly Titled” notes that with the exception of the choice of potential guardians for children, the most important function of a will is to make certain that the transfer of assets to beneficiaries happens the way you intend.
However, not all assets are disposed of by a will. Some pass to designated beneficiaries, regardless of the intentions stated in the will. Your will only controls the disposition of assets that fall within your probate estate. All assets titled to you alone and delivered through the will pass through probate–that’s how a will works.
Life insurance is an example of when a designated beneficiary controls the disposition of a financial asset. Other examples are retirement accounts, such as a 401(k) or an IRA. When there’s a named beneficiary, assets will be distributed accordingly, which may be different than the intentions stated in a will.
The title of real estate controls its disposition. When a property is jointly owned, how it is titled determines if the decedent’s interest in the property passes to the surviving partner, becomes part of the decedent’s estate, or passes to a third party.
In the same light, a revocable trust is an inter vivos (or living) trust that’s created during the grantor’s life as part of an estate plan to avoid probate. Such a trust can be used to ensure privacy, avoid the expenses and delays of the probate process, and provide for continuity of asset management. A critical part of the planning is that the grantor must transfer (or retitle) assets to the trust.
Signing a Last Will and Testament is very important in estate planning. To ensure that your estate plan fulfills your intentions, talk to your estate planning attorney about the proper titling of your assets.
Reference: Forbes (May 20, 2019) “For Estate Plan To Work As Intended, Assets Must Be Properly Titled”