When it comes to estate planning, one of the most frequent topics I’m asked about is account ownership and asset management. These aren’t just administrative details – they’re essential for ensuring your assets transfer smoothly to your loved ones and are protected from potential risks. Understanding how your accounts are titled and who has access to them can make all the difference in creating a thoughtful Life & Legacy Plan.
In this first installment of a two-part series, I’ll answer some of the most common questions about asset ownership and management, offering strategies to simplify things for your family after you’re gone. Let’s start by looking at the difference between joint ownership and transfer-on-death designations.
Q: What’s the difference between joint ownership and transfer-on-death designation?
Joint ownership allows two or more individuals to share full access and ownership of an account or property while living. When one owner passes away, the surviving owner automatically assumes full ownership. While convenient, this arrangement comes with risks. A joint owner could withdraw all funds at any time, or creditors and legal judgments against either party could jeopardize the account or property.
By contrast, transfer-on-death (TOD) or payable-on-death (POD) designations give you sole control over your account during your lifetime. Your named beneficiary has no access to the account while you’re alive but will automatically inherit the assets upon your death – avoiding probate entirely. However, be mindful that joint ownership or TOD/POD designations bypass any instructions in your will or trust. This could lead to unintended consequences, especially in complex family dynamics.
For instance, if you name one child as the joint owner or sole beneficiary, the entire account will pass to that individual, potentially causing conflict among siblings or relatives. This arrangement may also leave assets to someone who is not financially responsible. To avoid such pitfalls, it’s important to carefully plan how you title your accounts and assets.
Q: If I use joint ownership or TOD/POD, do I still need a trust?
While joint ownership or TOD/POD can simplify the transfer of assets, they often fall short when it comes to providing comprehensive protection. For example, joint ownership exposes accounts to the creditors of either owner. I had a client whose grandmother added her granddaughter as a joint owner on her bank account. When the granddaughter’s husband faced a business lawsuit, the creditor garnished the account, leaving grandma’s money at risk.
TOD/POD arrangements, while bypassing probate, only operate in the event of death and do not address incapacity. Additionally, unexpected circumstances—like a simultaneous death scenario – can complicate things. For example, if a grandmother designates her grandson as the TOD beneficiary on her home, but both die in an accident, the home may end up in probate and pass according to state intestacy laws, possibly against her wishes.
The most reliable way to avoid these issues is to establish a trust. By retitling your property into a trust, you gain control, privacy, and the assurance that your assets will be distributed according to your wishes. A trust also simplifies the process for your loved ones, avoiding court proceedings and ensuring that your plan is executed seamlessly.
Q: What happens to retirement accounts and life insurance policies after death?
Retirement accounts and life insurance policies bypass probate and go directly to your named beneficiaries. However, this only works if your beneficiary designations are accurate and up to date. Naming outdated beneficiaries, such as an ex-spouse or a deceased individual, can cause your assets to go to the wrong person or end up in probate.
If you’ve named a minor as a beneficiary, this can create additional complications, as the assets will be held under court supervision until the child reaches legal age. To avoid these challenges, consider naming a trust as the beneficiary to provide guidance and oversight until your minor heirs are ready to manage the funds responsibly.
Q: Do I need an inventory of my assets?
Absolutely. Creating and maintaining an up-to-date asset inventory is one of the most critical components of effective estate planning. Without it, your family may struggle to locate your accounts or assets, potentially leading to unclaimed property. Surprisingly, many estate plans omit this essential step, leaving families in the dark.
Our Life & Legacy Planning process includes a comprehensive asset inventory to ensure everything is accounted for and easily accessible. This prevents assets from getting lost or falling into the hands of the state as unclaimed property. With $77 billion in unclaimed property nationwide, this step alone can save your family significant time, money, and stress.
Q: How often should I review my asset inventory and account designations?
It’s essential to update your inventory and beneficiary designations regularly, especially after major life events like marriage, divorce, the birth of a child, the death of a beneficiary, or the purchase of significant assets. Keeping everything current ensures your plan reflects your wishes when the time comes.
With our Life & Legacy PlanningⓇ process, we proactively remind you to update your inventory and make adjustments as needed. This ensures no assets are overlooked and that your plan remains aligned with your life’s changes.
Q: What’s the best way to organize and store my asset information?
The key is to create a clear, organized system that your loved ones can access easily in case of an emergency. Avoid listing sensitive information, such as passwords, in your will since it becomes a public document after your death. Instead, store these details securely and share access instructions with trusted family members or your executor.
When we work together, I’ll help you explore secure and practical ways to organize and store this information, ensuring it’s available when your family needs it most.
How We Can Help
At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.
To learn more about our one-of-a-kind systems and services, contact us or schedule a no-obligation 15-minute introductory phone call today.