When I do estate planning, I realize that my clients often need guidance on what happens to their property or estate. For the purposes of this blog, think of your property or estate as everything you own.
Whether you have a will or trust or are considering getting either a will or trust, you are doing the right thing. You want to have a plan for your loved ones and you want to make sure your property goes to the people you want to have it.
You need to consider how certain property gets passed on and whether or not it goes per the terms of your trust or will or outside it. What that means is you need to consider some of the following classifications of property and or accounts:
If you have bank accounts with no joint owners or PODs, that is persons designated as payable on death, those accounts go into a probate estate account in the probate process. The accounts can then be used to pay any estate expenses during the estate process.
If you have a joint owner, those bank accounts most likely go to the joint owner outside the probate process. What that means is that those funds simply belong to the joint owner who has no legal responsibility to share with any of your heirs.
Another common bank account designation is payable on death. That means you can designate someone to get the bank account funds once you pass on. Again, those funds belong to the designee and there is no legal responsibility for that person to share those funds with any of your heirs.
Joint Tenancy With Right of Survivorship
A common and very inexpensive way to handle estate planning is to place property ownership as joint tenancy with right of survivorship, (“jtros”). The most common way this is done is between a husband and wife on a marital residence but jtros can be used for other parties and types of properties. In this instance, let’s say a husband and wife own a house as jtros. If the husband dies first, the wife gets the house without the need for any probate subject to any loans on the house. There would only need to be a death certificate filed in the chain of title at some point to show this.
However, in this scenario, when the wife dies, the house would go through probate to her heirs per her will.
Many times a husband or wife can avoid probate by having all forms of their property listed as joint tenants with rights of survivorship.
Tenancy in Common
Another common form of joint ownership of property is tenancy in common. If two people own real estate or other property as tenants in common, and one dies, the property has to go through probate for the deceased person’s portion to go to that person’s heirs.
Life Insurance, 401(k)s, and IRAs
Life insurance proceeds go directly to designated beneficiaries outside of probate. 401(k)s and IRAs are retirement accounts that have to remain in your personal name even if you have a trust. 401(k)s and IRAs also have beneficiaries. However, you can make your estate or trustee a beneficiary to have those funds go per the terms of your will or trust.
Brokerage Accounts, Vehicles, and other Types of Property
If you own stocks, bonds, etc. in a brokerage account, vehicles, or many other types or real or personal property, these items generally go to heirs through probate. If you have a trust, the trust can own the properties so that the trustee simply distributes them per the terms of the trust.
We are experienced at helping clients develop an estate plan that gets your property to the people you want with the least amount of stress. Reach out to Ron Debranski for assistance with crafting your estate plan to your needs.