BY: Daniel M. Savage
Our clients and prospects frequently inquire about titling their real estate, various accounts, and other assets. The benefits of proper asset titling include:
- avoiding probate,
- assisting with the management of property, and
- ensuring that family members have immediate access to funds at death.
Asset Titling can be tricky, however. It’s important to understand the different types of titling available and the potential issues surrounding titling in order to get the result you’re after.
Types of titling
This form of titling involves two or more owners and assumes equal ownership while they are alive regardless of their individual contributions to the asset; moreover, both parties have the equal, undivided right to control the property. Joint tenancy creates a right of survivorship, which means ownership passes to the surviving party outside of probate and is not controlled by the decedent’s estate plan.
Marital Property with Rights of Survivorship
This special form of joint tenancy can only be used by spouses. Rules affecting use, control, and transfer upon death are identical to those outlined above.
This method also involves multiple owners but does not create a right of survivorship. Title holders are current owners while alive with ownership interests proportional to the amounts they contributed to the asset. Upon death, a title holder’s share will pass according to his or her estate plan.
This method transfers an asset to a named beneficiary upon death. The beneficiary is identified on a form provided by an institution (bank or securities firm) or in a beneficiary designation recorded with the register of deeds (real estate). The beneficiary lacks ownership rights during the property owner’s lifetime. Upon death, property is transferred outside of probate and the decedent’s estate plan.
This is similar to TOD but normally applies only to bank accounts, including certificates of deposit.
Revocable Living Trust
If you adopt a living trust-based estate plan, your attorney may advise you to retitle some or all of your assets into that living trust for administrative purposes. Your trust becomes the owner of the assets, and your right and ability to control them usually continues, because you name yourself as trustee. Upon your death or disability, your successor trustee will assume immediate control over your trust assets. Assets held in your trust will not be subject to probate.
Certain assets — such as life insurance policies, annuities, qualified retirement plans, Wisconsin real estate, and IRAs — permit an owner to name one or more beneficiaries who will receive the assets upon the death of the owner. Assets transfer directly to named beneficiaries outside of the decedent’s estate plan and probate.
What issues need to be considered when making titling decisions?
Wisconsin is a marital property state.
Unless you have a marital property agreement, this means that a married couple’s assets accumulated during marriage and while living in Wisconsin are considered as owned on a 50/50 basis regardless of titling. A deceased spouse may only direct the distribution of his or her one-half interest in the couple’s assets and his or her individual property. The other half remains with the surviving spouse.
Beware of TOD and POD designations.
Remember, these designations supersede what is stated in a will or trust. Absent coordination with the rest of your estate plan, a TOD or POD could leave your estate without sufficient means to pay final expenses and taxes. They can also result in the beneficiaries of your estate plan receiving less than they anticipated or than you intended.
Think twice (and then twice again) before adding an owner to one or more of your accounts.
Doing so will likely create a joint account with immediate ownership and survivorship rights. Unintended consequences include your account being subject to the creditors of the new owner during your life and upon your death, as well as family disharmony. If you want help with a given account, consider adding that individual as an ‘agent’ instead of as an owner.
Several ownership forms outlined above do not provide for alternate distributions if that named beneficiary fails to survive you.
They also fail to provide for certain trust protections, other distribution plans, and planning for minors. Think of these as lost estate planning opportunities.
What is the best way to ensure that my assets are properly titled?
Begin by reviewing titling and beneficiary designations for all of your assets.
This includes your primary residence, other real estate, bank accounts, insurance policies, annuities, IRAs, trusts, qualified retirement plan accounts, investment accounts, and other assets.
Next, review your will, durable power of attorney for finances, and other estate planning documents, such as a revocable living trust.
Make sure that the terms contained in those documents are consistent with your current wishes and harmonize with your titling choices.
Consult with your estate planning attorney.
When it comes to “dollars and sense,” a second opinion can help ensure that your assets are successfully transferred according to your wishes.
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