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The titling of assets when establishing your estate plan has been a topic of conversation in my office for a number of years. Clients do not appreciate that the way they title their assets has a significant effect on their estate plan. If assets are not titled correctly, then an individual’s plan for who receives how much of their estate can be drastically changed.
For example, let’s assume that a husband and wife with two children both execute a Last Will and Testament. The husband’s Will states that upon his passing, all of his probate estate assets will pass to his wife, if living, otherwise to his two children in equal shares. The wife executes a Will with the exact same language, except it says that her probate assets will pass to the husband first, and then if the husband is not living, then equally to the two children.
Let’s assume that husband and wife have a house worth $200,000 and a bank account that is worth $100,000. Let’s also assume that the husband passes away first. Therefore, the wife is the sole owner of the house and the bank account. It is the wife’s plan that when she passes away, each of her children will receive $150,000 after the house is sold. Once again, assume the house is sold for $200,000 and there is a $100,000 bank account on the day that the wife passes. Therefore, each child will receive $150,000.
However, while the wife is living, she decides that it is very important to have one of the children who live the closest to her have access to her bank account in order to pay bills if she is not able to pay them. Therefore, the wife and the local child go to the bank and the local child is put on the bank account as a co-owner. (The real need here is for a wife to have a power of attorney for property, whereby she names the local child to have authority to write checks and pay bills, and then there would be no need to add the child on as a co-owner.) By the wife adding the local child on as a co-owner, upon the wife’s death, the bank account technically is owned by the local child, and the local child would also receive one-half of the house. Therefore, the local child would end up with $200,000 of assets and the other child would end up with $100,000 of assets. That is drastically different than what the wife wanted.
Once again, please make sure that when you work on your estate planning documents, such as wills and trusts, that you also look at all of your assets and how they are all titled. It is also important to determine who is named as a beneficiary on an asset as well. These are two critical aspects of estate planning that oftentimes gets overlooked and cause more assets to pass to one beneficiary than desired.
Please contact your local estate planning attorney for more information on all of these matters.
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.