Effective Titling Of Assets Can Benefit Estate Planning Probate Documents
Many people do not understand the distinctions between how one titles one’s assets and the resulting repercussions from it. Properly titling one’s assets can greatly increase the effectiveness of one’s estate plan. Some of these distinctions are described below:
- Power of Attorney: Adding another individual as power of attorney on an asset does not convey any ownership rights, but allows an agent to manage the asset and utilize it just as if the owner could. The agent is known as your attorney-in-fact. Adding a power of attorney does not keep an asset from having to go through the probate process, but allows an agent to manage the asset (pay bills, etc.) without having to go through a guardianship proceeding.
- Payable on Death/ Transfer on Death: often confuse Power of Attorney (POA) with Payable on Death (POD) designations. By designating someone as a Payable on Death (POD) beneficiary does not give any rights during the owner’s lifetime but allows the asset to pass directly to the payable on death beneficiary on the death of the owner without having to go through the probate process. It “avoids probate.” Payable on Death (POD) is usually used with intangible personal property like bank accounts and CDs and Transfer on Death (TOD) is usually used with tangible personal property like real estate and cars but the effect is the same. It passes the asset on after death outside of probate.
- Tenants in Common: When multiple individuals own property jointly as tenants in common, they each own an individual partial interest and can designate whomever they want to pass it to at time of death. For estate planning purposes, this is usually less preferable to titling as joint tenants with rights of survivorship.
- Joint Tenants with Rights of Survivorship: multiple individuals own title as joint tenants with rights of survivorship, when one owner dies, ownership automatically vests in the surviving owners. It avoids probate and is not controlled by the decedent’s last will and testament. It must include the language “joint tenants with rights of survivorship” or “for their joint lives, remainder to the survivor of them.” Many people believe that an asset is held as joint tenants with rights of survivorship, but it is actually held as tenants in common because the appropriate language has not been added.
- Trusts: Assets held in trust are no longer held in an individual’s name, but held by someone as a fiduciary for the trust. Therefore, power of attorney cannot be used, and if the trustee of the trust cannot serve, the successor trustee of the trust must take over. Assets held in trust avoid probate. However, POD or TOD designations cannot be used, the decedent’s last will and testament does not apply and all trust assets are managed and distributed in accordance with the trust document itself.
Titling Of Assets Can Be Complicated, Consult With A Probate and Estate Planning Attorney Today!
As you can see, titling of assets can be not only confusing, but critical in one’s estate plan. If you have any probate or estate planning questions, you should direct them to a reputable and experienced estate planning advisor or attorney.
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Joseph E. Balmer
Joseph Balmer manages the Probate, Trust and Estate Administration department at Dayton, Ohio, law firm, Holzfaster, Cecil, McKnight & Mues, and has been certified by the Ohio State Bar Association as a specialist in Estate Planning, Trust and Probate Law since 2006.