The process of estate planning can conjure images of land barons and industrialists picking out hedges and how many fountains to purchase. Despite this connotation, estate planning is far more important for those with modest assets. Here, we explore three key tools that can help individuals with smaller estates to effectively manage the transfer of their assets after passing away.
We’ll use a fictitious ‘Helen’ to demonstrate the use and importance of three estate planning tools: a will, joint ownership, and beneficiary designations. Helen’s estate consists of three assets. She has a condo with about sixty thousand dollars in equity. She has a bank account that holds about five thousand dollars in it. She has a car that she’s paid off worth six thousand dollars. Helen can use all three of these tools to help transfer her assets after her death.
1. Creating a Will
A will is a foundational document in estate planning. It allows individuals like Helen to specify exactly how her assets should be distributed upon her death. Helen could use a will to divide her assets equally between her children, Bob and Suzy, or allocate them in any proportion she chooses. Moreover, she can appoint an executor in her will to oversee the distribution process.
2. Utilizing Joint Ownership
Joint ownership is another strategy for asset transfer. Helen could add her daughter Suzy as a joint owner of her bank account. Upon Helen’s death, Suzy would automatically become the sole owner of the account. This method bypasses the need for probate, making the transfer process straightforward and efficient.
As far as the law is concerned, the moment a death certificate is produced, the account now belongs to Suzy alone. No additional paperwork or time needs to occur.
3. Beneficiary Designations
Beneficiary designations are commonly used for life insurance policies but can also apply to other assets. Helen signs a beneficiary deed for her car, specifying that it should pass to Bob upon her death. This approach ensures a seamless transfer of property ownership without the need for probate. Bob simply bring in a death certificate to the DMV and his name goes on the deed.
Addressing Potential Conflicts Between Will and Joint Ownership
There are some complications that people face even with these simple tools. How does the law handle situations where there’s a discrepancy between a will and joint ownership? For instance, if Helen’s will states that both Bob and Suzy should inherit equally, but only Suzy is named as a joint owner of an asset, the joint ownership will take precedence. Suzy would inherit the entire asset, regardless of the will’s instructions. So, while they both would receive half of the condo (in cash if liquidated or joint names if retained), only Suzy gets the bank account and only Bob gets the car. It’s crucial to align these designations with the actual intent to avoid unintentional disinheritance.
Each of these tools – wills, joint ownership, and beneficiary designations – has its advantages and drawbacks.
Even for smaller estates, effective estate planning is crucial. It ensures that your assets are distributed according to your wishes, with minimal complications for your heirs. For those considering estate planning and looking for guidance on these tools and more, Clear Counsel Law Group offers consultations to help with this process and achieve peace of mind.