If you’re starting to look into estate planning, it’s easy to get overwhelmed with all the different aspects of the process. There are a number of key considerations, including the creation of a will, naming an executor, appointing power of attorney and so on. However, one critical factor to examine is proper asset titling.
The titling of assets means making sure that your assets are legally owned by yourself or your beneficiaries, in such a way that they can be passed to the intended heirs with as little hassle and additional cost as possible. If your assets are not properly titled, it could result in state probate – a process in which the court reviews all documents surrounding your assets and liabilities, which can be slow, painful, public and costly.
At this point you may be wondering – is asset titling the same as having a will? Actually, this is a common misconception, and it’s important to differentiate between the two. A will, unlike titled assets, is still subject to probate. The state must determine that everything is in order within the will and then certify it as valid, a process which is also open to contest from family members or other parties, and which can take time. Asset titling, on the other hand, ensures that assets pass directly to named beneficiaries, completely outside the probate process. Indeed, titling your assets to designated beneficiaries will actually supersede what’s written in your will.
The first step to ensuring your assets are titled in a way that matches your wishes is to speak with a professional estate planning attorney. It’s particularly important to seek out expert assistance if you have children or significant assets; or if you have any reason to believe that you might become incapacitated and unable to manage your assets. Married couples who are not jointly listed on all their bank accounts or properties should likewise seek out support to expedite the process of asset titling.
One simple and very common way to start the process of titling your assets is to open a POD (payable on death) account. This special kind of bank account enables the accountholder to designate beneficiaries who will directly receive the entirety of the funds within the account; with no probate needed. All that the beneficiary needs to do is to present an original death certificate of the owner of the account. And again – this passing of assets to the POD beneficiary can occur even if there is a will or living trust that says something different.
POD accounts can be set up in a few different ways, whether as a checking account, a savings account or a money market account. A POD account may be liquid or it could be other types of investments such as certificates of deposit (CDs) or US savings bonds.
Another benefit of a POD account is that it can be set up with joint owners. In this case, a married couple or business partners or any other group of people can all access and control the account during their life; and upon the death of all account holders, the assets in the POD account will be passed on to the titled beneficiaries designated by the couple or group of account holders in their estate planning process.
If for any reason the designated beneficiaries are not able to collect the money in the account – for example, if the beneficiary should pass before the account holder – then any money remaining in the POD account will be counted as part of the account owner’s general assets and subject to probate.
When it comes to asset titling and POD accounts, divorce is another important factor to consider. During the divorce process your attorney will most likely have already led you and your spouse through the process of adjusting your asset titles, based on your wishes for the future of these accounts, properties or other assets. However, it’s always a good idea to review all the fine print with a professional estate planning attorney, to ensure that your estate is set up in the best way possible to be passed on according to your wishes.
Besides supporting your intended beneficiaries to access any inheritance as smoothly as possible, asset titling can also reduce their financial burden in terms of estate taxes, which can be better managed or avoided entirely if a property passes on to a designated beneficiary via asset titling. Probate fees to attorneys or other personal representatives pose another financial challenge in cases of non-titled assets. These fees are often calculated based on the gross rather than net value of assets, which means beneficiaries could struggle to cover the costs.
For more information on asset titling, POD accounts and other elements of the estate planning process, get in touch with a professional estate planning attorney. They can walk you through all the ins and outs and help you to draw up an estate plan or review your current one. HUECU members have access to the GreenPath Financial Wellness Program, which is a great place to find further resources around estate planning and asset titling.