Asset titling can change the estate plan
You may have proudly completed your Will, Financial Power of Attorney, Health Care Power of Attorney and Living Will or Advance Health Care Directive and feel that everything has been taken care of. On the other hand you may have opted for a Living Trust.
In either case, you might believe you have completed everything necessary to establish your estate plan. Maybe you recently read that some well known person died without a Will, leaving his estate in disarray and this was your incentive to forge on. You might have had an experience in your own family.
Having completed your estate documents, you might believe that is enough.
You still have one very significant step to take. You must examine your assets to see how they are titled and also examine your beneficiary designations for life insurance and retirement funds — IRAs, 401(k) s, 403(b)s. If you have not considered these, your estate plan is incomplete and your assets may be directed in a very different manner than you expected on your death.
Even experienced financial advisors, when speaking to audiences, sometimes suggest that listeners can assure their assets are distributed as they want on death by preparing Wills without discussing titling of assets or beneficiary designations.
A Will covers only probate assets. Non-probate assets pass by other means typically joint titling or beneficiary designations on retirement funds such as IRA’s or beneficiary designations under life insurance or annuity policies or funds held in trust, or transfer on death (TOD) or payable on death (POD) accounts.
A study conducted several years ago in the U.S. determined that more than onehalf of assets in the U.S. do not pass by Will, but rather by joint titling, beneficiary designations and trusts. Titling and beneficiary designations take precedence over the Will.
The idea that titling affects final distribution can be particularly troubling for seniors — both because they may have lost their spouse of many years and are considering placing one or more of their children on their accounts and because some have remarried and it is tricky to have assets distributed the way they want, as between a second spouse and children.
Most parents considering a second marriage should consult with an attorney who handles estates to assure that their assets are divided as they wish after they die. Second marriages raise questions such as whether there should be a life estate in the house and how assets can pass to their children instead of their new spouse’s children if they die first.
Most husbands and wives are accustomed to titling assets jointly.
When one of them dies, the survivor considers adding children to the account so that a trusted family member will also be able to pay bills and make deposits.
While a power of attorney will accomplish the same objective of allowing the child to pay the bills without changing the title, the senior might think that she could avoid this step by establishing a joint account.
As to whether this is a good strategy — it depends. If the account is what I refer to as an “in and out” account, that is one where monthly checks are deposited and checks are written to cover them and a small balance remains
each month, there is no great financial concern. This is a matter of convenience. But if the account or accounts are substantial, the result can be that the child who is named joint on the assets inherits all.
The joint titling question becomes more emotional when seniors title their assets jointly with their adult children or grandchildren and view this as one way of transferring ownership to the next generation. Whether this type of informal “estate plan” makes sense depends on the circumstances.
The property owner should know — “why am I doing this?” and “what are the results both during my lifetime and when I die?”
When considering your estate plan it is best to play out all the possibilities with all the assets including those that do not pass by the Will, and get help if the questions cannot be easily answered. Janet Colliton, Esq. is a Certified Elder Law Attorney and limits her practice, to elder law, retirement and estate planning, Medicaid, Medicare, life care and special needs at 790 E. Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@ collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, cofounder of Life Transition Services LLC, a service for families with longterm care needs. Tune in on Wednesdays at 4 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Elder Law Associates, and Phil McFadden, Home Instead Senior Care.