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Plan Now, Avoid Chaos Later

For people who have accumulated any amount of assets, the question “what’s the most efficient way to transfer assets to my loved ones when I pass away” often comes up. The main objective people want to accomplish is to pass these assets as intended and avoid probate. In many cases this is easy, for others it can be a little more complicated.

I don’t know any sane person who wants the government involved in their private affairs. This is especially true when it comes to dealing with the distribution of estate assets. On average probate takes six to nine months to complete. However, complications can cause the process to take much longer.

There are complicated situations where the need for creating a Trust is warranted. However, for most people taking a few simple steps with how their assets are titled and making sure their beneficiary designees are correct, is all that’s needed to get their affairs in order. Let’s look at these steps by different types of accounts and asset classes.

Retirement account assets (all types of IRAs, 401k, 403B etc.) and all

Life Insurance policies (including annuities) pass to each designated beneficiary as required by law and avoid probate. To make sure your wishes are carried out you should review, and if necessary, update beneficiaries every few years. It’s important to know, the beneficiary designation on these accounts supersedes the last will and testament. For example, if your son is the beneficiary of your IRA but you really intended per your will for your sister to inherit these assets, your sister will be left out.

Non-retirement accounts including: regular brokerage accounts, bank checking/savings accounts and CD's. You are technically not allowed to have a beneficiary on these accounts, however avoiding probate can be accomplished by titling these accounts properly.

  • Transfer on Death or TOD registration, this allows the transferee to take ownership of the account after the owners’ death and avoid probate.
  •  Joint Tenants with Rights of Survivorship registration will allow assets to pass to the joint owner by operation of law. This is the typical registration for married couples. The downside, the joint owner will have rights to the assets in the account prior to the owners’ death. If you opt for this route choose wisely.

Real and Personal Property including: Real estate, automobiles, jewelry and collectibles.

The easiest and most cost-effective way to accomplish this is to use Joint Tenants with Rights of Survivorship. For example, if a person is not married, and plan to bequeath real estate to a trusted child, he or she can be added as a joint owner to avoid the asset from passing through probate.

When it comes to your estate, a little planning now can help your family avoid chaos later.

Tom Ferrell, CERTIFIED FINANCIAL PLANNER™

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