Retitling of Assets is Critical to Your Estate Plan
Jun 17, 2021 | Written by: Share|
The estate-planning process is completed in several stages. Initially, I meet with clients to discuss their estate planning objectives. Next, I prepare draft estate plan documents for them to review. I then finalize the documents and meet with my clients to execute same in the presence of the necessary witnesses. But is that where the estate planning process ends? Absolutely not!
To make your estate plan work, title to the assets that you own must be coordinated with your estate plan documents. If you provide in your Will or trust agreement for the disposition of certain assets, then those assets must be available to the executor and the trustee to legally distribute to your intended beneficiaries. For example, if your Will purports to dispose of your IRA, your executor will struggle with completing that distribution because an IRA has what is called a “Designated Beneficiary” (DB). The same holds true for life insurance policies and certain investment accounts where the owner can name a DB to receive the asset directly upon the owner’s death outside of the deceased owner’s probate estate.
Likewise, if you wish to transfer an asset to a trust created under your Will, and if the asset requires a DB, then you must change the DB on the account to identify the trustee under your Will as the distributee of that asset to be held pursuant to the terms of the trust for the benefit of the intended beneficiary.
Retirement plans are especially tricky in this regard. This is particularly true with respect to all ERISA-qualified plans, because the retirement account holder’s spouse must be designated as the primary beneficiary on the account unless the spouse waives and disclaims in writing his or her interest therein. This is true even if the account owner has been divorced and the former spouse remains the DB of record on the ERISA-qualified account. Divorce does not revoke the DB status of the former spouse. I receive many calls from distraught families because a deceased parent “forgot” to change the DB on a retirement plan that now must be distributed to a former spouse of the decedent -- the exact opposite result of what the deceased account holder intended.
Estate planning is important for all New Jersey residents, not just for the wealthy. Very often a set of simple estate plan documents and corrected Beneficiary Designation forms can be prepared to achieve the decedent’s intended result and thereby avoid a financial disaster for surviving family members. Call me for a consultation. I can explain how the estate tax system works and the steps that you can take to best protect the financial interests of the family members who inherit your assets.