Creating an estate plan isn’t just about distributing assets — it’s about ensuring your loved ones are cared for, and their burdens minimized, should the unthinkable happen. A comprehensive estate plan is vital if you want to ensure your wishes regarding medical decisions, financial decisions, and distribution of their assets are followed to the letter. Having a plan in place offers your loved ones peace of mind, maximizes the amount that gets passed down to your beneficiaries, and helps avoid ugly family disputes.
Your attorney is an essential partner in this process, offering invaluable advice and guidance every step of the way, especially when it comes to one of the most important parts of the process — how to title your assets in a way that optimizes the benefits for your beneficiaries and minimizes the need for expensive, contentious, and drawn-out probate proceedings.
There are several factors to keep in mind when tackling this aspect of estate planning. Let’s explore the various options for how to title your assets in the estate planning process.
Establish a Trust
A common strategy in estate planning is to create one or more trust instruments, which give you more oversight over how and when your assets are distributed. If you are the named trustee, you can title your property to the trust but still retain financial control.
Trusts offer a number of advantages, including offering protection for your loved ones from lawsuits, hefty estate taxes, and the hassle of probate.
There are different types of trusts, and an experienced estate planning attorney can help you decide what’s best for your specific goals. Many people establish trusts for minor children, family members with special needs, or charitable organizations. You can also title property to a trust specifically for the care of your beloved pets so you can have confidence they’ll be cared for if anything happens.
Depending on your personal situation, you may want to consider the benefits of building a living or revocable trust. With a living trust, you can customize the financial distribution of your assets and retain the power to revoke or alter the terms of that distribution during your lifetime.
This type of trust is a useful tool for holding property for minors and includes the ability to set specific stipulations on the conditions for disbursement.
Sole Ownership
Most people have at least a few assets they own individually, such as bank accounts, cryptocurrency, automobiles, art, jewelry, or a business. If you don’t have a living will or estate plan in place and you become mentally or physically incapacitated, the court may appoint a guardian of the estate to act in your stead. In the event of incapacity, the appointed guardian can take control over your personal property.
Assets that are individually owned are also subject to any and all claims from your creditors as well as any applicable estate taxes when they pass to your heirs. Under current law, the tax burden could be as high as 40%, and your heirs may have to liquidate some of your property to cover this cost.
Managing the ownership, control, and tax treatment of personal property is often one of the most complex aspects of creating an estate plan, particularly for individuals whose personal property includes assets with significant value. It’s crucial that you complete a thorough inventory and appraisal of your personal property and have a discussion with your attorney regarding the most advantageous arrangements for the disbursement of your individually owned assets to your beneficiaries.
Transfer-on-Death Instruments
Transfer-on-death instruments can include brokerage accounts, stocks, bonds, or real estate that will immediately transfer ownership to your designated beneficiaries upon your passing, thereby bypassing probate and reducing the costs and complexity of distributing your estate.
For bank and investment accounts, your broker will provide you with a form where you can declare the designated recipients of your accounts upon your passing. A new account will be created in their name once they have received the proper documentation.
Similarly, bank and money market accounts are typically designated as payable-on-death instruments. To ensure that these assets are distributed efficiently, it is vital to confirm with your financial institution that they have all of the information they need to distribute your funds to your beneficiaries when the time comes. Assets with pre-designated beneficiaries such as life insurance, 401(k) funds, and annuities are automatically distributed to those named parties, easing the burden on your loved ones and ensuring that they have all of the resources they need as they manage the sometimes considerable costs that can be associated with the passing of a loved one.
For property owners, ensuring that a family home is passed down is often one of the most critical aspects of estate planning. As of 2022, the Illinois Transfer on Death Instrument Act was expanded and now includes all forms of real estate in the state, not just residences. Since real estate held as a transfer-on-death instrument, or TODI, is considered a non testamentary instrument, there is no need for probate in these situations, although property transferred in this manner is still subject to estate taxes.
If you would like to create a TODI for one or more of your real estate properties, your estate planning attorney can ensure you have prepared all of the necessary documents. These will need to be signed in front of two witnesses and a notary, and must be filed with the Recorder of Deeds office in the county where the property is located.
With these types of accounts, it’s critical to be sure the forms that are filed with your bank, insurance company, county records office, or brokerage firm exactly match the information in your will and overall estate plan. If there’s a discrepancy, the parties involved could face an expensive legal battle. Working with an experienced estate planning attorney can ensure that your property is passed down according to your wishes, without wasteful, contentious, and lengthy proceedings.
Jointly-Owned Assets
Joint tenancy is defined as two or more people owning a home or other property in equal measure. This type of title confers the right of survivorship, meaning if you own real estate with your spouse or domestic partner, they’ll receive your share upon your death without the involvement of the probate court.
However, this right doesn’t cancel out the need to have a comprehensive estate plan in place..
Your property may also be owned as a tenancy in common, where each party owns a specific percentage of the property. In this event, any owner can sell or otherwise dispose of that owner’s interest. For property held in a tenancy in common, the owner’s interest passes according to that owner’s estate plan or, in the absence of an estate plan, by the law of intestacy.
Get Expert Advice
Moving forward with the estate planning process can seem overwhelming, especially if you have an extended family or an extremely diverse portfolio. It’s also a sensitive topic that not everyone enjoys discussing.
It’s essential to partner with an experienced and compassionate advocate who can help you navigate the complexities of planning for the future and make sure your loved ones are provided for.
If you want to know more about how to get started, reach out to schedule a one-on-one consultation with one of our expert attorneys.
