A great number of people go through the effort of preparing a Will or Trust, signing these documents, performing any necessary funding steps, and then proceed to close their estate planning file for the rest of their lives. Your estate plan must be reviewed on a regular basis and updated when necessary in order to make sure it accurately states your wishes.
How Property Passes to Heirs
Once you pass away, your property passes to your heirs in one of two ways:
- By designation; and/or
- Through probate or trust.
“By designation” refers to the process of identifying and transferring certain property to others automatically, such as using a designation as Payable On Death (POD), Transfer On Death (TOD) or Joint Tenancy with Rights of Survivorship (JTWROS). For example, you can set up a bank account to be POD to someone who you select and designate with the appropriate bank. Additionally, marital homes are very often owned in Joint Tenancy with Rights of Survivorship, which means that when the first spouse passes away, ownership of the marital home automatically transfers to the surviving spouse without having to go through Probate. These types of designations transfer property at your death without the necessity of Probate or Trust.
A Probate procedure in court, or a Trust, only transfers property not previously designated. For example, if you have a bank account without a designated beneficiary and you happen to pass away, a Probate or Trust is needed to distribute this bank account to the heir(s). A problem arises where property, such as a bank account, is listed in a Will or Trust to be inherited by person “A” and that same bank account is designated as POD to person “B.” In this scenario, Person “B” gets the contents of the bank account. A property designation always trumps a Probate or Trust transfer because designated property legally transfers immediately after death before the Probate ever begins or a Trust can transfer.
Avoiding Ownership Disputes
How can you avoid these potential ownership disputes? Make sure that any property that is designated to transfer automatically after your death is set up to transfer according to your current wishes. In order to do this, you should take the following steps:
- Contact all of your account holders (banks, brokerage firms, IRAs, etc.) and ask for an information printout of each account showing ownership, the present value of the account, and any beneficiary designations. This is a very simple task that is usually accomplished with one keystroke on a computer or a short phone call to the appropriate financial institution.
- Request the same type of information on all life insurance policies. This can avoid the potential situation wherein a spouse on his/her second marriage failed to update a life insurance policy and change the beneficiary from the ex-spouse to the new spouse. This can be a simple oversight by the decedent with a dramatic outcome for his/her heirs.
- Obtain a copy of all your property ownership documents, including, but not necessarily limited to: Real estate deeds, vehicle titles, and even cattle brands should be collected. Note: As far as cattle are concerned, if you leave all of your cattle to your children in your Will, but your business partner, Jim, is named as the joint owner on the brand – Jim gets the herd.
- After you have organized the above information, review it to see whether your property is designated, or not, according to your present wishes. Otherwise, your carefully drafted Will or Trust could become meaningless.
Take steps to give yourself, and your family, Peace of Mind today. Contact Clinch Law Firm, LLC to schedule a consultation at our York, Nebraska office, or feel free to schedule a complimentary 30-minute telephone consultation or a 60-minute in-person consultation for a time that works for you here: Appointment Scheduler. Virtual appointments are also available, upon request.