Why Asset Titling is so Important with Estate Planning

When reviewing or putting together an estate plan, there are so many documents and items to review and things to do that it can be overwhelming. Many don’t understand how the titling of an asset directs how assets flow into an estate. Your attorney likely sent you a letter with detailed steps on how to re-title assets, but it’s easy to overlook these steps and forget that asset titling needs to be done.

Making sure your assets are titled correctly can save your family a lot of headaches. Asset titling determines how your assets are managed during your lifetime and how they are distributed upon your death according to your will, based on state law or agreement, or beneficiary designation.

Asset titling is often overlooked and is one of the most important elements of an estate plan. It helps determine who receives an estate’s assets based on the terms of the estate planning documents or will. If asset titling has not been correctly coordinated with your estate plan, the terms of your plan may not turn out as you intend. You could have a very well drafted will but no assets passing through the terms of the will.

Working with an experienced estate attorney can help coordinate asset ownership with an estate plan and ensure those assets will go to beneficiaries based on your wishes. They can also ensure appropriate tax planning takes place upon your death.

Misperceptions

Many incorrectly believe that all of their assets will be distributed according to the terms of their will or trust upon their death. However, many assets—in some cases everything–could pass outside their estate, depending on how the assets are titled. It’s sadly a common story to hear of spouses that have setup bypass trusts to discover upon the death of the first spouse that there are no assets in the trust because they are owned jointly, bypassing the estate entirely.

Problems like these are often the result of incorrect and failing to understand and abide by titling.

Assets owned “joint with right of survivorship” or “tenants by the entireties” will go directly to the survivor or to the named beneficiary. Common examples include IRAs, retirement accounts, annuities and life insurance.

Other issues arise when assets are acquired after the estate is planned. The will, trusts and titling all need to be coordinated to make sure everything works as it is supposed to. Your financial planner, CPA should communicate with your attorney to make sure the plan functions properly.

Titling Options

There are three primary types of title ownership; fee simple, joint tenancy with right of survivorship and tenancy in common.

Fee simple is the ownership of assets by one individual. The individual owns all property solely and can sell it, give it away or leave it on death. The property will flow into the client’s estate and is subject to probate upon death. The property will be distributed according to the terms of the will. To avoid probate, fee simple property can be titled in the name of an individual’s living trust.

Joint tenancy with right of survivorship is often used by couples that are married. However, it can be used by two or more individuals if they each have an equal interest in the assets and that they acquired the equal interest during the same time. Each owner or co-owner owns all of the property equally with the others. The owners can transfer or sell their interest during their life, but cannot leave or donate the interest at death. This type of ownership it transfers the property automatically to the other owner(s) and does not allow the deceased’s share of the property to pass into his estate.

Tenancy in common refers to when there is more than one owner of the property and each owner owns a share of the asset. Each owner has the right to give away, sell, or leave his or her share at death however has less control of the whole property than an individual who owns a fee simple interest.

If you want to ensure your estate plan runs smoothly and that your assets are titled correctly, the attorneys at Rice Law have experience with asset titling in estate planning.