Creating an estate plan with legal instruments like wills and trusts is the most thorough approach for designating successor owners for assets after someone passes away. However, less complex beneficiary options exist, too. Methods like joint accounts, payable-on-death accounts, gifting assets and directly naming beneficiaries enable passing select properties without formal court-involved probate. While expedient, understanding each tactic’s unique pros and cons remains key for avoiding unintended consequences later on.
Naming beneficiaries directly: One option is to name beneficiaries directly on certain assets, such as retirement accounts, life insurance policies and payable-on-death (POD) or transfer-on-death (TOD) accounts. This method offers several advantages. First, it bypasses the probate process, which can be lengthy and costly. Second, it allows for a faster distribution of assets to beneficiaries, often within days or weeks. Additionally, it provides a level of privacy, as the distribution of these assets is not a matter of public record. However, this approach also has its drawbacks. Naming beneficiaries directly may not account for changes in your life circumstances or relationships over time. Moreover, if the named beneficiary predeceases you, fails to outlive you by a certain period or is incapacitated, the asset may pass to the estate, potentially leading to probate or unintended distribution. It’s essential to review and update beneficiary designations regularly to ensure they align with your wishes and circumstances.
Joint asset ownership: The simplest tactic is establishing joint ownership by naming a beneficiary co-owner on bank and investment accounts, real estate deeds, vehicles and other valuable assets. Upon the original owner’s passing, the surviving co-owner automatically inherits the deceased’s share based on title ownership percentages. But joint ownership also removes control. Your co-owner beneficiary can immediately withdraw or sell assets you intended for someone else. Disputes frequently erupt between survivors claiming a right to the funds.
Gifted assets: Lifetime gifting allows people to permanently sign over ownership of physical properties like real estate, vehicles, jewelry or art to whomever they choose – no probate needed. The same applies to digitally gifting cryptocurrency wallet access. However, forfeiting personal use of special assets during retirement years seems unnecessary. And placing legal conditions on future sale or distribution rarely holds up later without formal trusts.
There are several pros and cons to passing assets to beneficiaries without estate planning. One of the main pros is that it can be a simple and cost-effective way to transfer assets to beneficiaries. However, passing assets without estate planning can also lead to disputes among beneficiaries, as they may disagree on how to divide the assets. In addition, passing assets without estate planning can also lead to legal issues, such as disputes over the validity of wills or the distribution of assets. Working with an estate planning lawyer allows crafting customized distribution plans for your assets and dependents’ needs.
Send your questions to ccolan@colanlegal.com and use “Alpine Mountaineer estate planning question” as the subject. We’ll answer your questions in our upcoming issues.
This article is provided by your local estate planning attorney, Corina Colan.
The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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