Estate Planning To Do’s

Estate Planning To Do’s

When was the last time you thought about your beneficiaries and the titles to your assets? Over time, as you accumulate bank accounts, investment accounts, property, annuities, and other assets that can gain value, it can be easy to forget about making sure these things are set to go to the people you want them to go to in the future.

It’s an important thing to think about, however, because proper titling can make transfer of assets easy upon your death. Your loved ones can avoid unnecessary fees, taxes, and court costs. Alongside a will, proper designation of beneficiaries can make it so that you can avoid setting up a complex estate plan unless you’re an individual who has a large estate. If this is the case then you’ll want to speak with an attorney.

In many cases, people who have accumulated assets over time and neglected to update beneficiary information have seen retirement accounts and insurance policies go to ex-spouses, leaving current spouses and heirs without any means to cover expenses after death. In those cases, it wouldn’t matter what a will said, because the beneficiary information was never changed.

That’s why you want to make sure you always know who your beneficiaries are. Aim to review everything at least once a year, or any time there is a major change in your life like a birth or marriage. Make sure your estate plan is on the same page as your beneficiary designations so that, upon your death, your assets go to those you want to make sure are truly taken care of after you pass.

In this post we’ll look at what you need to do to make sure your accounts are handled in a way that sees everything transfer to your heirs smoothly and accurately after your death.

What You Need to Know About Account Ownership

It all starts with who is named as an owner on an account and the goal is to limit taxes and avoid having your estate go into probate.

You can do that through either joint ownership or by naming a beneficiary under the clauses of “transfer on death” or “payable on death”.

Starting with joint ownership, there are three different ways that you can title a joint account. Which one you ultimately want to use will depend on your situation, and you have to keep in mind that they affect your estate in various ways.

First is “Joint Tenancy with Rights of Survivorship“. Put simply, when one owner dies, the other becomes the sole owner of the property in question. Having an account titled this way avoids probate, at least until the death of the joint owner. With that in mind, it’s important to have a plan in place on what to do with an account like this upon the death of the surviving owner.

Next is “Tenancy by Entirety“. This designation is just like Joint Tenancy with Rights of Survivorship, only it’s purely for married couples. This means that the couple is viewed as a single legal entity and the creditor of one spouse cannot sell interest in the property in question.

Third is “Tenancy in Common“. Under this designation, when one of the joint owners dies, his or her share in the property becomes part of their estate, meaning that they can pass it on as they see fit in their will.

What You Need to Avoid

Keeping ownership in mind is a good start, but it’s just the first step. As I mentioned earlier, you need to be sure that the right people are named as beneficiaries on things like retirement accounts, life insurance policies, and annuities. These assets will pass to the named beneficiary regardless of what your will says, making this step extremely important in setting up your estate.

At the very least, not having the right beneficiaries named on your accounts will create conflict among your loved ones after you’re gone, so it’s something you want to avoid at all costs.

You also want to consider naming someone as a Transfer on Death (TOD) or Payable on Death (POD) beneficiary. These beneficiaries are named on accounts like savings and checking accounts, as well as investment accounts and property like homes and vehicles.

You need to be careful with these types of accounts, however, because designated beneficiaries under these terms take priority over anything stated in a will. This can make a will virtually pointless and your assets might not go to the people you originally intended. So you want to ensure your TOD and POD assets are aligned with the language of your will.

You also have to consider taxes with these types of accounts, because they may be subject to them depending on the nature of the will. If that’s the case then you will need an attorney to help you create a more complex estate plan.

Everyone’s situation is different, so you will need to speak with a professional in order to begin planning an estate that is right for you. As always, feel free to contact me with any questions you might have. I’m happy to help you get started with planning your financial future.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Pence Wealth Management and LPL Financial do not provide legal advice or services.

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