Even if your financial life is pretty simple, you should have a will. However, there’s more work to be done. 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 is the way you intended.
However, not all assets are disposed of by a will—they pass to beneficiaries regardless of the intentions stated in the will. Your will only controls the disposition of assets that fall within your probated estate.
An example of when a designated beneficiary controls the disposition of a financial asset is life insurance. 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 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. Titling of jointly owned property can be complicated in community property states.
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.
Such a trust can be used to ensure privacy, avoid the expenses and delays in 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.
Wills are very important in estate planning. To ensure that your estate plan fulfills your intentions, talk to an 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”