Last week we introduced the Will, identified what it is and why every adult should have one. This week we will discuss what assets are controlled by a Will and the importance of asset titling.
A common misconception about Wills is that your Will controls the disposition of all of your assets upon death regardless of how those assets are titled when, in fact, it is the titling of those assets that actually controls their disposition.
When it comes to understanding how assets are distributed upon death, it helps to group assets into two main categories: “Probate” assets and “Non-Probate” assets. Probate assets are disposed of in accordance with the terms of a person’s Will upon death, while Non-Probate assets are disposed of based on some other mechanism upon death (i.e. a contract or the law).
In order to determine if your assets fall into the “Probate” versus “Non-Probate” category, you have to review your assets and identify how each individual asset is titled. If an asset is titled solely in your own name with no joint owners and no designated beneficiaries, then that asset is a Probate asset and will be distributed in accordance with the terms of your Will upon your death. All other assets are Non-Probate assets.
Here are some examples of Non-Probate assets you may own and a brief description of how those assets would be distributed upon your death:
- A bank account titled jointly with your spouse will be distributed directly to your surviving spouse upon your death.
- A retirement account or life insurance policy where you designate your children as the beneficiaries will be distributed directly to your children upon your death.
- An investment account where you designate your sister as a Transfer on Death (TOD) beneficiary will be distributed directly to your sister upon your death.
- A bank account titled to the name of your Revocable Trust will be distributed in accordance with the provisions of that trust upon your death.
- A bank account where you designated your son as a Payable on Death (POD) beneficiary will be distributed directly to your son upon your death.
In sum, the titling of your assets controls their distribution over the terms included in your Will. Take the time now to review the titling of all your assets to ensure they will be distributed to the correct people upon your death, whether distributed in accordance with the terms of your Will or directly to someone based on how they are titled. Contact us to schedule a free consultation if you would like to discuss in more detail how the titling of your assets may impact your overall estate plan.