Titling Assets Incorrectly could Destroy An Estate Plan

Author:  Joseph Mattera

Many people assume that once they execute their estate planning documents, they are assured that their assets will pass to those beneficiaries named in their Wills.  Whether or not this is true depends on how their assets are titled.  Estate plans can be destroyed when a person does not consider the proper way to title assets to comply with their intentions in their Will.

As an example of an estate plan gone bad, consider “Bob” who has an estate valued at $500,000.  Bob wants to leave $10,000 to each of his 10 nieces and nephews and the rest of his estate ($400,000) in equal shares to his 2 sons.  He intentionally did not include his daughter in his Will since they have not communicated for the past 5 years. This is reflected in his Will.  However, Bob did not consider the titling of his assets.   More than 5 years ago (when relations were better with his daughter), Bob designated his 3 kids as equal beneficiaries on most of his assets (IRA, investment accounts and bank accounts).  These accounts total $450,000 of  his $500,000 estate. These assets do not pass pursuant to Bob’s Will since they are “non-probate” assets, thereby passing directly to the named beneficiaries. This leaves only $50,000 to pass pursuant to his Will. The Will also states that all taxes, funeral expenses, legal fees, executor fees, debt and court costs are to be paid from Bob’s “probate estate”; i.e., those assets passing pursuant to his Will.  Bob’s taxes, funeral expenses, legal fees, debt, costs, etc. total $20,000, leaving just $30,000 to be distributed to his beneficiaries in his Will.  The result?  His nieces and nephews will receive $3,000 each and  his sons get no part of his probate estate.  The $450,000 in his non-probate assets passes in equal shares to Bob’s 2 sons and his daughter, even though he intentionally left his daughter out of his Will.

During his lifetime, Bob made a major mistake in failing to coordinate his desires in his Will with the titling of his assets.

When planning, it is extremely important to discuss all relevant issues with your attorney, including, but not limited to, a plan of distribution, financial affairs, titling of assets, health issues, family dynamics, tax issues and probate issues.

If you have any questions about this article or your estate plan in general, please contact Joe Mattera at (937) 223-1130 or jmattera@pselaw.com.  Joe’s practice is focused on estate planning (including long-term care planning and special needs planning), elder law, and probate and trust administration.

AUTHOR: Joseph Mattera