Everyone Has an Estate Plan, Even if by Default

Everyone has an estate plan. Even if you have never been to visit an estate planning attorney, the assets that you own will - one way or another - find their way to someone else upon your death. There are, in general, three basic ways that assets pass after someone has died. Proper estate planning takes all of these into account to ensure your wishes are followed.

An effective estate planning attorney can ensure your assets are distributed according to your wishes in an efficient way. There are three basic ways assets pass after someone has died:

  1. Joint ownership. Assets that are jointly owned with right of survivorship automatically pass over to the other remaining joint owners when a person dies. This is common for houses, jointly owned bank accounts, and the like.
  2. Beneficiary designations. Many assets can have designated beneficiaries that dictate how the asset will be distributed when the owner dies. This is common for retirement accounts, life insurance, but can also be used for bank accounts and real estate.
  3. Probate. In general, assets that are not owned jointly and do not have a beneficiary designation would be by default probate assets. These assets are distributed either under a person's will or through the default laws of intestacy that are applicable when a person has no will. Often times, real estate, bank accounts, or stock can trigger probate.

Each of these methods can be used to pass assets from you to your beneficiaries, and they are often used in combination with each other. A revocable trust can be used to transfer assets out of the probate category and into a fourth category of trust-owned assets. The benefit here is that the assets do not go through probate.The table below gives a brief summary of wills, trusts, and transfer-on-death plans:

Unlike wills, trusts are administered privately. Upon your death or incapacity, the person you named as a trustee will begin managing your trust assets. The trustee will begin managing the assets according to the instructions in the trust and for the benefit of the trust beneficiaries.

Holding assets in a trust can allow your assets to be protected from creditors of the beneficiaries and prevent a beneficiary from inheriting assets before they are mature enough to handle it. For example, a trust might hold assets until the beneficiaries reach age 35. Trusts can contain other special provisions expressing your values (e.g. educational, charitable trusts). Trusts are also an effective way to hold assets when the administration process needs to be more autonomous. This might be because of purchase options, estate tax concerns, quick sale of assets, or disproportional treatment of beneficiaries.

Beneficiary designations on bank accounts, life insurance policies, stock accounts, and the like complete the estate plan. When using a trust, it often makes sense to name the trust as primary or secondary beneficiary of an account. This ensures that the special provisions of the trust apply to the assets.

Your estate plan should be a reflection of your wishes and values. It should also be prepared in a way that best fits the realities of your situation. The right estate planning attorney can accomplish these goals.

For more information, contact the attorneys at Ward & Oehler, Ltd. or book an appointment online.

You can also subscribe to our newsletter!

Categories: Estate Planning