By, Shirley Farmer, Attorney at Law
The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your estate planning professional.
Article #12, Some Common Estate Planning Options for Accounts, Real Property, and Vehicles
Prior articles have talked about the various legal documents that can be written up to make your wishes known for your loved ones in preparation for the eventual distribution of your estate. This month we are going to look at some more specific options for assets that have written identified ownership such as accounts, vehicles and your home or land.
Accounts. Along with designating in a Will or Trust who you would like to inherit your financial accounts, financial institutions such as bank and credit unions also allow account holders to add another person to your account as a joint account holder or to designate through the bank records who will receive ownership of the account upon the account holder’s death. The latter option is commonly called designating a “beneficiary upon death” or “payable on death” option, though the name will vary between institutions.
A person added to an account as “joint” holder of the account has all the same access to the funds in the account and the account statements and records as the original account holder. Upon the death of one of the joint account holders, the account simply becomes the sole property of the surviving named account holder. Conversely, a person noted as the beneficiary upon death has no right to the account or funds held in the account, cannot access it to remove funds from the account, and cannot obtain the records while you are still alive. The beneficiary upon death receives the account as his or her sole property after the death of the account holder, the same as with a joint account, but the beneficiary does not have the ability to touch the account until that time.
These can be useful tools to consider if you want to make sure the funds in your bank account pass directly to your beneficiary and are quickly accessible to him or her upon your death. Each makes sure the account will go where you want it to, with the beneficiary upon death option reducing some of the concerns and potential for mismanagement that can arise from adding your beneficiary’s name to the account as a joint holder able to access the account while you are still alive and needing it, too.
There are some potential drawbacks when using these options, though. If you only have one beneficiary, these can work great as a way to get the account into his or her hands when the time comes. However, say you have three beneficiaries who you want to inherit your estate in equal shares – so each would receive 1/3 only. If only one beneficiary’s name is listed as the beneficiary on death of your bank account, that account will pass to that beneficiary directly and entirely, ignoring the other two beneficiaries. If your Will is not worded correctly, this could result in that beneficiary upon death receiving all the funds in the account plus still his one-third share of the entire estate – basically, resulting in one beneficiary receiving a lot more than the others.
Real Property (house, land, condo). Real property, such as your home and land, has a deed recorded at the recorder’s office for the county where the property is located that says who owns the property. Some individuals choose to change the deed to the property to add the name of the intended beneficiary as co-owner so that the beneficiary receives the property upon the death of the originally listed owner. This can be used as an estate planning tool so that the real property does not have to pass through probate; however, the wording on the deed must include specific language for this to be effective (TIP: not all deed templates such as those you can purchase at a stationary store will include the necessary wording to make this work). There may also be concerns for financial ramifications from “gifting” an interest in the property, along with the concerns similar to those discussed above that this can result in uneven distribution of your estate if you have more than one beneficiary. An additional concern with adding a beneficiary’s name to the deed of your home, in that if the beneficiary has or incurs debt or other financial obligation the creditor could look at their interest in your home as something that could be used toward payment of the debt. Adding another person’s name to the deed of your property is very serious and alters the ownership of the property. Make sure to research this carefully before diving into this option.
Vehicles. Vehicles are a titled document similar to how houses have a deed to show ownership. The same option is available to be able to add another person’s name as co-owner of the vehicle by adding the beneficiary’s name to the title. While a vehicle is generally worth considerably less than a house, the same concerns regarding uneven distribution of the estate and potential liability of the beneficiary impacting the ownership of the vehicle should be taken into consideration.
These are just a few of the more common tools utilized in some estate plans for assets that have identified ownership. The concerns regarding an uneven distribution of your estate can usually be overcome by careful drafting of your estate planning documents (ie: your Will or Trust). There are pros and cons for each of these options, though, so make sure to discuss with your estate planning professional before taking action to make sure the option you choose will meet your goal and be in your and your beneficiary’s best interest.