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Estate planning involves the development of a plan to ensure that your assets pass at your death to the beneficiaries of your choice at the lowest possible estate tax cost and in a form which best meets your desires and the recipients’ needs. A good estate plan involves not only the execution of a will and possibly a trust, but it also needs to incorporate how your assets are titled and who is named as a beneficiary of those assets.
One of the most asked questions I receive from clients during our initial estate planning meeting is “How do I avoid Probate?” After receiving that question, I usually prepare the following chart:
BENEFICIARY—-POD——-DECEDENT—–JTWROS—-BENEFICIARY
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WILL (Executor)
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BENEFICIARY
I then explain that when someone passes away we call that person the decedent. The decedent usually has a will and has named an executor in the will who will administer the estate. I then explain that we need to look at all of the assets that were in the decedent’s name individually or with someone else. For example, if the decedent owned a checking account that was in his or her name alone, then his or her will controls the disposition of the funds in the checking account. If the will controls the disposition of the funds in the checking account, those funds are subject to probate. That means that the Probate Court has jurisdiction over those funds to make sure that they pass according to the terms of the will. The key to determining who the owner of the checking account is depends on who is listed as the owner on a legal document called a signature card. This document is executed at the bank at the time the checking account is opened. The bank retains this document. In the above example, the checking account was only owned by the decedent.
Another way to own the checking account is for the decedent to own the account with another person jointly with right of survivorship. (JWROS) Again this is determined at the time the account is established but can be done later. This is done by checking a box on the signature card that says joint with right of survivorship. If an account is owned this way, either owner can withdraw funds from the account during the decedent’s life and upon the death of one of the owners, the funds in the account belong to the surviving owner despite what the terms of the will of the decedent provides. Since the will does not control who receives these funds, the checking account is not subject to probate.
Another way to own the checking account is for the decedent to own the account and name someone as a payable on death beneficiary. (POD) Again this is usually selected at the time the account is established but can be done later. This is done by completing the section on the signature card which pertains to naming someone as a POD beneficiary. If an account is owned this way, only the owner can withdraw funds from the account during his or life and upon the death of the owner, the funds in the account belong to the POD beneficiary despite what the terms of the decedent’s will provides. Since the will does not control who receives these funds, the checking account is not subject to probate.
A number of other ways exist to own assets to avoid probate. You should contact your estate planning attorney to develop an estate plan that accomplishes your wishes based on the specific types of assets that you own.
The moral of this story is that in order to make sure your wishes are followed in your estate plan, in addition to executing a will, make sure that you review how all of your assets are owned and titled, who you have named as beneficiaries of all of your assets, and that you understand exactly how the ownership and beneficiary designations will effect the ultimate disposition of your assets upon your death.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663
Phone: 330-364-3472
Fax: 330-602-3187
Email: jcontini@www.kwgd.com
www.kwgd.com