It’s Not Only a Will – Distributing Assets

It’s Not Only a Will – Distributing Assets

By: Martin M. Shenkman, CPA, MBA, JD

It's Not Only a Will - Distributing Assets

By Martin M. Shenkman

It’s Not Only a Will

  • When people think of leaving assets to their heirs, they think of wills. But its really about a lot more. If you don’t take a comprehensive view of the way all your assets will pass on your death your goals won’t be met.
  • There are 3 ways to pass assets:
    • Will. Yes, you knew that. Your will can transfer assets to the heirs you indicate after those assets go through a process called probate.
    • Trust. Most people think immediately of a revocable living trust which is used to avoid probate. That is a common way to pass assets, but there are other types of trusts. If you inherit assets, the best way to inherit them is in a trust. This can save your estate taxes, protect assets from claimants and divorce, etc. Then those assets will pass under the terms of that trust. If you own insurance it might be best to have it in its own trust.
    • Contract. People forget about legal documents other than wills and revocable trusts that pass assets, but contracts control how more and more assets will pass. Many people pay for revocable trusts when all their assets pass by contract:

      1.     Insurance – beneficiaries listed in the insurance application.

      2.     IRAs – by beneficiary designation.

      3.     House – often by how the deed is written.

      4.     Brokerage account – some have beneficiary designations.

      5.     Bank account – often by the title or ownership of the account, e.g., ITF = “in trust for”, POD = “pay on death to”…, etc.

      6.     Stock in a closely held business often passes by the terms of a shareholders agreement or buyout agreement.

      7.     Prenuptial or post-nuptial agreement can govern much of what you do.

  • Why it is so important. If you don’t understand the implications of the way each asset passes, and how the tax and expenses of the estate will be paid for those assets, your heirs could be in store for some nasty surprises.

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