Your Will Isn’t the End of Your Estate Planning
A Will is Just the Starting Point for a Good Estate Plan

Your Will Isn’t the End of Your Estate Planning

Even if your financial life is pretty simple, you should have a will. However, there’s more work to be done than just doing a will. Assets must be properly titled, so that assets are distributed as intended upon death. Having a will is just a start.

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.

Find out if a living trust gives you a better estate planning solution than just a will.

Reference: Forbes (May 20, 2019) “For Estate Plan To Work As Intended, Assets Must Be Properly Titled”

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The Estate Planning Goal of What To Do with Mom’s House
What To Do With Mom's House After She Dies

The Estate Planning Goal of What To Do with Mom’s House

It’s a not uncommon estate planning objective for the surviving parent to leave the family home to her children. At the parent’s death, estate planning questions often arise concerning how long the children have before they must sell it or change the deed. What if one sibling wants to live in the home for a while, before it is sold?

nj.com’s article on this subject asks, “Mom died and left us her home. What do we have to do next?” According to the article, the executor is tasked with gathering the assets, paying the debts and taxes (if any) and then distributing the assets, in accordance with the parent’s will.

If the home was in the parent’s name alone, it makes the property a probate asset that’s passed according to the will. In addition, if the will provides that under the residuary clause everything that’s left is to be distributed equally among the children, it will give the executor discretion to liquidate and then make the distributions.

There also may be a specific provision in the will covering the home.

There’s no specific timeline as to when the property has to be transferred. However, the executor is required to act prudently and in a reasonably timely manner.

In this situation, the home will most likely be sold. It is also the executor’s responsibility to pay the bills associated with the home, until a buyer is found.

If one child wants to live there, and it’s agreeable to everyone, make sure that she doesn’t refuse to leave, when it comes time to sell.

Note that landlord-tenant laws protect a tenant and may create an issue. The executor may want to talk with an attorney to determine what steps are necessary to protect against the tenant refusing to leave.

Learn how good estate planning lessens the chances of children fighting.

Reference: nj.com (April 1, 2019) “Mom died and left us her home. What do we have to do next?”

Common Asset Protection Mistakes in Titling Real Property
Asset Protection Mistakes When Taking Title to Real Property

Common Asset Protection Mistakes in Titling Real Property

Asset protection is an important consideration when deciding how to take title to real property. Title to real property must be transferred, when the asset is sold and must be cleared (free of liens or encumbrances) for the transfer to occur. This is where asset protection comes in. Unlike other real property assets, real estate ownership can take several forms which affects how well the asset is protected. Each of these forms has implications on how ownership can be transferred and can determine if they are asset-protected and also may affect how they can be financed, improved or used as collateral.

Investopedia’s article, “5 Common Methods of Holding Titles on Real Property,” looks at the ways in which to hold title to real estate property.

Joint Tenancy. This is when two or more people hold title to real estate jointly, with equal rights to enjoy the property during their lives. When one dies, their rights of ownership pass to the surviving tenant(s). The parties in the ownership need not be married or related, but any financing or use of the property for financial gain must be approved by all parties and cannot be transferred by will after one passes. Another disadvantage is that a creditor with a legal judgment to collect a debt from one of the owners, can also petition the court to divide the property and force a sale in order to collect on the judgment.

Tenancy In Common. In this situation, two or more persons hold title to real estate jointly with equal rights to enjoy the property during their lives. However, unlike joint tenancy, tenants in common hold title individually for their respective part of the property and can dispose of or encumber as they chose. Ownership can be willed to other parties, and in the event of death, ownership will transfer to that owner’s heirs undivided. An owner can use the wealth created by their portion of the property, as collateral for financial transactions, and creditors can place liens only against one owner’s specific portion of the property. Any liens must be cleared for a total transfer of ownership to take place.

Tenants by Entirety. This can only be used, when the owners are legally married. This is ownership in real estate under the assumption that the couple is one person for legal purposes. The title transfers to the other in entirety, if one of the couple dies. The advantage is that no legal action is required at the death of a spouse. There’s no need for a will, and probate or other legal action isn’t necessary. Conveyance of the property must be done in total, and the property can’t be subdivided. In the case of divorce, the property converts to a tenancy in common, and one owner can transfer ownership of their respective part of the property to whomever they want.

Sole Ownership. This is ownership by an individual or entity legally capable of holding title. The main advantage to holding title as a sole owner, is the ease with which transactions can be accomplished, since no other party needs to authorize the transaction. The disadvantage is the potential for legal issues regarding the transfer of ownership, if the sole owner dies or become incapacitated. Unless there’s a will, the transfer of ownership upon death can be an issue.

Community Property. This form of ownership is by husband and wife during their marriage for property they intend to own together. Under community property, either spouse has the right to dispose of one half of the property or will it to another party. Anyone who’s lived with another person as a common-law spouse and doesn’t specifically change title to the property as sole ownership (which is legally transacted with approval by the significant other) takes the risk of having to share ownership of the property, in the absence of a legal marriage.

Community Property With the Right of Survivorship. This is a way for married couples to hold title to property. However, it is only available in Arizona, California, Nevada, Texas, and Wisconsin. It lets one spouse’s interest in community-property assets pass probate-free to the surviving spouse, in the event of death.

Entities other than individuals can hold title to real estate in its entirety. Ownership in real estate can be done as a corporation. The legal entity is a company owned by shareholders but regarded under the law as having an existence separate from those shareholders. Real estate can also be owned as a partnership, which is an association of two or more people to carry on business for profit as co-owners. Real estate also can be owned by a trust. These legal entities own the properties and are managed by a trustee on behalf of the beneficiaries. There are many benefits, such as managerial influence, financial and legal liability and tax considerations.

Learn how to maximize asset protection by taking title to real property in the best way.

Reference: Investopedia (April 10, 2018) “5 Common Methods of Holding Titles on Real Property”