I get that a lot when I begin this conversation with my clients: Did you know
that even if your will states how your assets are to be distributed after you
die, it does not mean that this is how they will be distributed? Instead, think
of your will like a vacuum cleaner: it’s designed to pick up the bits and
pieces left after your property and assets are distributed through means of trusts,
contractual beneficiaries, and even the way you title your property or assets.

One of the most common errors I see in estate plans is the manner in which
the assets in the estate are “titled.” Or that titling of your assets
is overlooked altogether. It might not seem like a very important choice when
you and your spouse open a bank account and choose the title of “joint
tenants with right of survivorship” or “tenants in common”,
but it is. How you title your property, both tangible and intangible, during
your lifetime will determine how this property will be distributed at your death.
And the more property you have, the more risk there is of your wishes not being
aligned with the laws regarding titling of this property.

I was visiting with one of my clients about the importance of obtaining a durable
power of attorney to ensure someone could take care of her financial matters
in the event of incompetency. She assured me that all was well because she had
placed her daughter on her bank account as a joint owner (JTWROS). Yet, although
she was headed in the right direction, she had unintentionally disinherited
her two sons and potentially exposed these assets to her daughter’s creditors.
You see if she died, her daughter would receive all of the assets in her bank
account. Her daughter would then be faced with distributing these assets to
her brothers, which could force the daughter to use part of her lifetime gift
exemption. Or if her daughter had been in a car accident and was being sued,
the creditors could come after the money in this account. Moreover, she was
under the impression that this would allow the account to avoid probate and
not be taxed. She was half-right: The account would avoid probate. However,
it would be counted in the gross taxable estate. The only time property with
this “JTWROS” title will avoid estate taxes is when the other owner
is a spouse.

Another big – though not uncommon – mistake is not properly titling your assets
to fund a trust. Why? Many people are not aware that property titled “JTWROS”
or “Tenancy by the Entirety” cannot pass into trusts established
by your will. What is the purpose of a trust if you cannot fund it?

As you can tell, each title has a different set of rules for taxes, probate
and transfer purposes. The most common titles are:

• Individual Ownership/ Sole Ownership
• Joint Tenancy With Rights Of Survivorship (JTWROS)
• Tenants In Common (TIC)
• Tenancy By The Entirety
• Community Property
• Contract Property
• Living Trust Property

And yes, it can be complicated. I suggest starting with this checklist:

• Know your net worth. If you don’t, work with your Life Consultant
  to determine this figure.
• Gather a list of all your assets and how each asset is titled.
• Review the beneficiaries of your retirement accounts, life insurance policies
  and other contract property.
• Review your current estate plan with your Life Consultant.
• Ask the following questions to your Life Consultant:
  1. Do I need to review or amend my estate plan with an attorney?
  2. Should I consider a trust to accomplish my estate planning goals?
  3. What is the most tax-efficient way to distribute my estate at death?
  4. Which assets need to be re-titled to conform to my updated estate plan?
• Make a checklist of the assets that need to be re-titled and have your
  Life Consultant hold you accountable.
• Review your estate plan and titling of assets on an annual basis.
• Have your attorney to review your legal document for the desired outcome.
• Have your executor(s) of your will and trustee(s) of your trust review your
  will or trust documents and make sure they understand your wishes in order
  to carry them out properly.

What I have given you is somewhat generic information and might not apply to
your situation. Every situation is unique. It is important to work with a consultant
who fully understands your present situation and your future goals, as well
as your feelings and your family dynamics in order to give you the best advice.
The main thing is that you know now what you didn’t know before – and
you can do something about it.