Pitfalls of DIY Estate Planning: Failing to Title Assets Properly

Of all the pitfalls relating to DIY estate planning, failing to title assets properly is the most widespread and most problematic issue. It is most widespread because informal “advice” about how to title assets is readily available and because assets can easily be beneficiary-designated. It is most problematic because title to assets is controlling. A few examples are illustrative:

1. If a person adds a joint tenant to a bank account, the general rule is that the surviving joint tenant inherits the entire account. Legally, the bank balance is not part of this decedent’s estate upon his/her death, which means that the account balance is not available to pay bills and leftovers are not distributed to his/her estate beneficiaries. Such a result often fuels arguments between the decedent’s children, some of whom may contend that such an arrangement is “for convenience only” and therefore the joint tenancy account should be part of the estate.
2. If a person adds a beneficiary to an asset—whether a bank asset, a brokerage account, a car, real estate, or a retirement account—the general rule is that the named beneficiary automatically inherits such asset and does not, legally, have to share it. This means that the asset is not part of the decedent’s estate and is not distributed to his/her estate beneficiaries. Further, if the named beneficiary predeceases the decedent, a probate proceeding is required.
3. If a person dies owning sole title to an asset that is an interest in real estate or worth $75,000 or more, there must be probate administration under Minnesota law. While probate is a process that works, it is relatively slow and cumbersome. The law makes no exception for the surviving spouse. If the decedent, who owns the homestead in his/her sole name, is a married person, the surviving spouse must probate title to the homestead.

Simply put, if a person wants his or her Will to be applicable upon death, his/her assets must be titled in his/her sole individual name and NOT beneficiary-designated. Alternatively, if the person wants his or her trust to be applicable and wants to avoid probate, his/her assets must be titled to his/her trust prior to death OR be beneficiary-designated to his/her trust. Estate planning will only be successful in passing the asset on to the correct beneficiary in the most efficient manner if legal documents and title to assets are coordinated. This means that there is no one-size-fits-all estate plan and that each person’s estate plan must be customized for his/her wishes, assets, and estate planning documents. Such is the purview of an estate planning attorney and not one’s neighbor or bank teller.

Please contact one of the attorneys in the Estate Planning Department at Henningson & Snoxell, Ltd. to assist you with your estate planning, estate administration, and elder law needs.