How Assets Are Actually Passed To Your Beneficiaries

Upon creating a will (or a trust), you may turn to your friends and family about what you should do next. A basic internet search will provide countless sites listing several actionable steps. You may need to develop a list of the assets you own, identify beneficiaries, and consider a potential guardian for your children. This doesn’t consider your medical and durable powers of attorney, which are fundamental for incapacity planning. Whereas your attorney will guide you through everything we mentioned, it is important to remember that you will need to contribute to the process too.


Our purpose here is not to discourage you from estate planning but rather to remind you that it is worth the effort and work. Estate planning is something that happens throughout your life. Some people may opt to write a basic will online and assume they have completed their estate planning. This is only one piece of the overall picture, and reaching out to an attorney is always advisable so you can understand the true ramifications of creating one on your own. We want to discuss a significantly overlooked estate planning component to highlight this issue. 


Why Everything Needs to Work Together

Whether you create a will or a trust, you need to understand that these tools allow you to dictate how your assets will be distributed when you pass away. There are pros and cons to both—and several different types of trusts—but that is beyond the scope of what we are discussing. Regardless of your choice, both trusts and wills can become ineffective if you fail to title your accounts in a way that works with your estate plan. 


Titles are legal documents that demonstrate that you own a specific asset. Imagine someone who is a widow, and they have a bank account in their name (and only their name). If they write a will and give the contents of that account to their children, minimal needs to be done with the account’s title when they draft their will. When this person passes away, the account goes through probate. After the probate process, whatever has not been used to pay creditors will pass to the designated beneficiary. The title on the account will be changed accordingly. 


However, let’s change one critical detail in the previous example. Imagine that the widow has three adult-aged children. Her husband left her the account’s contents, and she asked for her oldest child to help manage it. She went to the bank and added her child’s name to the account. She gave up ownership of the account and placed considerable power into the bank associate’s hands. Why? Many of these accounts come with small check boxes that say Joint Tenants with Rights of Survivorship (JTWROS). Bank employees are not estate planners; if this box gets checked, it has significant ramifications.

When the widow passes away, that account goes to her eldest child because of JTWROS—regardless of what her will states. 


Build Your Estate Plan Correctly

When we create an estate plan with you, we will guide you through these common pitfalls many overlook. Although we will likely ask you for several key documents, our biggest goal is to develop a plan per your wishes. The person in the previous example created a will that was superseded by how her account was titled. Regardless of which estate planning vehicles you choose, we will ensure they are done correctly. You deserve that level of peace of mind. Contact our office to schedule your consultation.

Luis E. Barreto