Is Your Estate Plan a Trick or Treat for Your Loved Ones?
What Happens if Your Account and Property Ownership Do Not Match Your Estate Plan?
Have you been lulled into a false sense of security because you have "done" your estate plan? Unfortunately, one of the dirtiest tricks that can be played on an unsuspecting family member may be lurking in the shadows: the way you own your property does not match your estate plan. This could make your estate plan a meaningless relic. How can you ensure that your estate plan works the way you anticipate for your loved ones when the time comes?
The key to ensuring that your estate plan will work the way you envision is understanding that how you own your money and property (i.e., how title is held) determines whether your will or trust, or neither, controls who will receive that money and property. A will only controls the accounts and property titled in solely your name or that do not have beneficiary designations when you die. So, if you jointly own a bank account or home (and are not the only owner) with a right of survivorship, the joint owner will likely inherit the account or home when you pass away rather than it going to a person you have named in your will. Because you were not the sole owner of the bank account or home, your will likely does not control who receives it. Rather, under the law, the surviving joint owner receives that property. The law assumes that if you had wanted your will to control who received that property, you would have held title differently.
Likewise, your trust instructions only control the accounts or property that are owned by the trust or that have designated the trust as the sole beneficiary after your death. (A beneficiary designation names who receives the money in an account or a piece of property at the owner's death.) Regardless of what your trust says, it will not apply if the trust does not own or is not the named beneficiary of an account or piece of property.
Example: Gomez Addams has a will, and a trust that names his wife Morticia as beneficiary. Gomez owns the Addams family home jointly with Uncle Fester. Gomez also has a life insurance policy. He names his daughter Wednesday and his son Pugsley as beneficiaries on the policy's beneficiary designation form. After Gomez's death, Uncle Fester becomes sole owner of the family home, and Wednesday and Pugsley split the life insurance proceeds. Neither the will nor the trust controlled because of how title to the property was held and how the beneficiary designations of the policy were completed. Morticia is left with nothing.
Avoid tricking your loved ones when you intend to give them a treat. We can help you ensure that your account and property ownership is consistent with your estate planning objectives so that your plan will work the way you expect.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional Counselors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
