A Good Estate Plan Will be Properly Coordinated

Estate planning is complicated because people do not understand there are different rules which govern different assets. In addition, there are a myriad of contingencies that need to be solved for so to speak. It would be easy if there were not so many rules and if we knew who exactly would survive, etc. There are probate avoidance consideration, tax considerations, family dynamic situations.

          Rule number 1: Not all assets are governed by a will.
There are many rules that govern the disposition of assets when someone passes.
          Retirement accounts are governed by the beneficiary designation on file with the plan administrator or custodian.
          Life insurance is governed by the beneficiary designation on file with the insurance company or sometimes if it is owned in a trust, the trust governs what happens to the proceeds.

Assets that are owned “jointly with the right of survivorship” will pass automatically to the surviving joint owner or joint owners by operation of law.
Assets that are owned jointly with no right of survivorship will be “tenants in common” assets and will be categorized as probate assets.
Assets owned in a trust or payable to a trust via a beneficiary designation will be governed by the terms of that trust.

As a result, you can see how it would be easy to mess up your planning. All of these assets need to be properly coordinated. We usually dictate the terms and instructions the client wants (including the contingencies) in their papers which includes a revocable living trust. Then to make the plan and the revocable living trust fully effective, we need to then address all the assets and make sure they are titled properly and or payable via designation properly to accomplish the goals.

For example, assume Tracy and Joe own several CD’s, some of which are owned by Tracy alone, some by Joe alone. And let’s say there are a few accounts where the children or one of them is co-owner. They did that so a child would have access to accounts if something went wrong. If Tracy and Joe are not careful, they can end up with a hodge podge of results. Different accounts can end up going to different people that were not intended.

Usually, as I stated before, it is best to have a properly coordinated plan. To say, upon my death, this child gets my house and the other child gets my bank and brokerage accounts can lead to disastrous results. We had a case where this was the planning, done by another attorney, and ten days before the mother died, her house had been sold. Now, that meant the child who was to get the house got nothing. It is better to dictate in terms of percentages. For real estate, it is a good idea to consider giving a right of first refusal to siblings prior to sale of a family house.

Contributed by:

Mark F. Winn, J.D., Master of Laws, LL.M. in Estate Planning, is a local tax, asset protection and estate planning attorney.