A Primary Key to a Successful Estate Plan: Estate Asset Titling

By NATC Contributor | June 2, 2020

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

Asset titling is often overlooked. However, it is one of the most important elements of an estate plan. If asset titling is not properly coordinated with an estate plan, the terms of the plan may not turn out as intended. A client may have a very well-drafted will but have no assets pass through the terms of the will if titling of the assets is inconsistent with the terms of the will.

Many 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 is not uncommon to hear of spouses that have set up a trust for a surviving spouse, only to discover upon the death of the first spouse, that there are no assets with which to fund that trust because they are owned jointly, bypassing the trust entirely. Problems like these are often the result of failing to consider titling. 

Title Ownership Types

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

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 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. 

Tenancy by the Entirety is basically joint tenancy between spouses. Property owned as such passes directly to the surviving spouse bypassing the terms of the will and trust and probate.

Application

Life changes, so should your asset titling. As life goes on, the will does not supersede the beneficiary named on the account. It is good practice to review all of the financial accounts that require a named beneficiary every 12, 24, and 36 months to ensure that all titles are aligned with the estate planning assets. Situations change constantly, it is important to make sure that the preferred beneficiaries and titles are kept current.

Ensuring that your client’s asset titling falls in-line with the terms of their will is crucial for the successful execution of the estate plan.

One of our Trusted Advisors can help you determine through trusted service what would work in the best interest of your clients when discussing Estate Asset Titling. You are your client’s Trusted Advisor, and we are your Trusted Advisor.

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