Tag Archives: beneficiary law

Beneficiary basics

WHY IS PROPERTY TITLE AS IMPORTANT AS YOUR WILL OR LIVING TRUST?

When you die, the way in which your beneficiaries are determined depends on whether the property is titled or not.

Property with a title includes real estate, vehicles, boats, airplanes, bank accounts, savings bonds, stock certificates, life insurance policies and retirement accounts. If you don’t have a will or a trust, state intestate laws will determine who inherits property with a title.

Property without a title includes jewelry, art, antiques, and your digital assets. Unlike titled property, there are no default laws that determine who inherits property without a title.

How are beneficiaries determined for property with a title?
How are beneficiaries determined for property without a title?

Property with a title

Title is the manner in which both real and personal property is owned. Title may be proven by certificate, deed, bill of sale, contract, signature cards or other documents. The title documents may also designate a beneficiary. The title may state that an individual owns the property or multiple people own the property, i.e., joint tenants with rights of survivorship, or a trust owns the property.

Title can indicate whether the property is owned by an individual, by joint tenants, or a trustee.

It turns out that a title is more than just a piece of paper conveying ownership of a house, a car or a safe deposit box. Property title determines whether contract law governs the inheritance of the property or whether the wishes written in your will or trust govern the inheritance of the property.

Q. What are asset buckets and why do they matter?

A. When you die, someone will make an inventory of your estate. Think of your titled assets as going into three buckets: the probate bucket, the trust bucket and the automatic inheritance bucket. Which bucket the asset belongs in is determined by the way the property is titled.

Probate assets:

Property owned by an individual
Property owned as joint tenants with rights of survivorship, no living joint tenant
Property where “Estate” is the named beneficiary or becomes the default beneficiary because the designated beneficiary died before the owner.
The decedent’s share of property owned as tenants in common

Trust assets

Property owned by a trustee

Automatic inheritance assets:

Joint tenants with right of survivorship, a living joint tenant
Community property with right of survivorship, a living joint tenant
Property owned by an individual, or more than one person with a designated living beneficiary: life insurance policies, retirement account, pay on death bank accounts, transfer on death brokerage account, tranfer on death real estate deeds and transfer on death vehicle registration forms.

Q. Why do the buckets matter?

A. Once you know in what bucket the asset belongs, you will know who has the authority to empty the bucket.

Probate assets

Probate assets will be managed by the executor named in your will or by a personal representative appointed by the court if you do not have a will.

Instructions in your will generally determine the beneficiary of your probate assets. If you do not have a will, state intestate secession rules determine the beneficiary.
The executor or personal representative must determine what type of probate procedures are required to get authority (Letters of Affidavits) to manage the property.

Trust assets

Trust assets will be managed by the successor trustee named in your trust.
Instructions in your trust determine who are the beneficiaries of assets owned by your trust.
The trust gives the successor trustee the legal authority to manage trust assets.

Automatic inheritance rights

Assets with automatic inheritance rights will be managed by the beneficiaries who automatically inherit the property.

The law automatically determines the beneficiaries and overrides any instructions contained in a will or trust.
A beneficiary has the authority to immediately claim their property with a certified death certificate and an affidavit or other claim form.

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Untitled property

Even if you die without a will or a living trust, default state and federal laws will determine who inherits your titled property. Untitled property is different. There are no default laws determining who inherits your untitled property.

Q. What happens to your untitled personal property?

A. For many families, deciding who will inherit personal property is a big emotional event. Memories are sometimes more important than money. Your heirs are more likely to argue about personal property than anything else you own. There are several ways to deal with personal property and keep the peace at the same time. First, you should decide who is going to get what. Just your children? Other close relatives? Friends? You can decide. It’s your property, after all.

If you have a will or trust, specify in your will or trust who gets what. Your will or trust should also reference a specific Personal Property Attachment which lists who gets what.

Q. What is the best way to document your personal property and how you want it divided when you die?

A. Many products are available to help make a list of your personal property. The information can be completed by hand or stored in electronic records. Most products provide a way to inventory your house room to room and list and photograph personal property in each room.

You can provide detailed information such as what it is, where you got it, if it’s an heirloom, etc. You can also include who you would like to receive it when you die.
You can also use a digital recorder and make an audio tour of your house, recording items as you walk through each room

The important thing is that you document what you have, where it is and who gets it when you die. Be aware that simply making a list of your personal property may not be deemed valid and legally enforceable upon your death unless the list is referenced within your will or trust.

Q. What happens to your e-mail, blog or other business processes stored on hosted site on the Internet??

A. If you own a small business and your accounting or sales systems are managed on hosted web sites (for instance, Yahoo, Google, Ebay, etc.), it is critical someone knows how to access these accounts. Digital assets are considered personal property. There are no default laws determining who has rights to access thee assets or state statutes an Internet Service Provider (ISP) must follow when someone dies.

The result: Each ISP has set their own policies on whether they will provide passwords or user IDS to your spouse, executor or trustee when you die. Some ISPs may not.

If you work in a small business, your chief executive officer or chief financial officer may not be able to access company files without your passwords.

When you set up accounts on hosted services, ask what their policy is regarding user IDs and passwords when someone dies. Plan accordingly. Create and maintain a list of URLs, user IDs and passwords for important data.

Q. How will your employees, executor or spouse gain access to data files stored on your personal computer.

A. You own the data on the PC. You have the right to leave instructions on who inherits any intellectual property stored on the PC. If you have data you don’t want someone to see after you die, be sure to delete it on a scheduled basis. Don’t forget to leave any user IDS or passwords someone will need to log onto your computer.

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Do I Really Need a Will?

Yes, you do. A will is a legal document which ensures that your property is transferred according to your wishes after your death.

If you don’t have a will, here are five things that can happen. We found this list at nerdwallet.com.

Spendthrift heirs – If you have heirs who aren’t equipped to handle a large sum of money, receiving it may cause damage. Perhaps these heirs are bad at handling money or, maybe, they’re drug or alcohol addicts.
Unexpected or contested heirs – There may be confusion about who the beneficiaries really are. Sonny Bono, musician and politician, died without a will. His ex-wife, Cher, and a man who said he was Bono’s son tried to claim part of his estate, which his wife, Mary, contested in court. Prince’s estate is another classic example. Many people came out of the woodwork claiming to be relatives, entitled to a piece of his assets.
Property (and probate) in multiple states – If you own property in more than one state, your estate will have to go thru the probate process more than one. Probate is a costly and timely process, even if you just go through it once. Image if you own property in four states and your heirs have to hire four attorneys and go through the whole process four times.
Fabricated wills – If you don’t have a real will in place, it’s possible for someone to create a fake one – especially if your estate is large. A famous case involved the estate of tycoon Howard Hughes. When he died, several supposed wills surfaced, and his estate spent millions of dollars defending against the false documents.
Beneficiaries don’t like the court appointed executor – If there’s no will, the probate court will appoint one. It may likely be an experienced attorney but not necessarily one the family knows. It may take a great deal of time for this person to take inventory, appraise assets and distribute the estate. If you have a will and name a family member as executor, that person will usually do a much faster job, possibly because that person is also a beneficiary.

If you don’t have a will, you should prepare one now. Otherwise, your assets may not be distributed the way you want them to and a lot of extra money will go to attorneys and the probate court and not to your heirs.

For more information about wills, trusts and other estate planning documents, go to www.diesmart.com.

Did he really just get the lorry?

Although this actually happened in the UK, it could just as easily have happened here.

Fred McGuinness owned a scrap yard. When he died at age 64 in 1987, he left everything to his wife Edith.

He had four children: David, Freddie, Kevin and Denise. David claimed that he and his brothers had been promised shares of the business to pay them back for all the years they spent working in the family business.

When Edith died at age 87 in 2013, David fully expected that their time had come to get their reward. However, Edith left everything she had, including the yard, to Denise. The only other bequest was a small one to charity. In a letter Edith wrote to accompany her will, she said that she and Denise had been excluded from the business and “mistreated”.

Although Denise owned a quarter of the business, her bookkeeping role had been eliminated, she never got a bonus and her pension was a “pittance”.

Edith also wrote that “since Mr. McGuinness passed away, she had watched his once-thriving business ‘go to nothing from greed’.”

Edith’s estate was valued for probate at more than £3million after tax and the court heard that a £12million offer had been received for the yard.

Although David had “taken it for granted” that he would inherit part of the yard, the probate judge disagreed. He said there was never “a cast iron promise” that the yard would be divided among all of the children.

The judge further ruled that the only thing David would inherit was a classic Morris lorry, valued at about £10,000.

You can’t assume that what’s been casually mentioned as what you’ll inherit will stand up in court. If you feel that something should rightly be yours, be sure to discuss it with your parents while they are still alive and get their commitment put into a legal document. Otherwise, you may find yourself – like David – without the inheritance you had been expecting…and experiencing friction with any other heirs.

Everyone should have a will that outlines what they wish to happen to their assets when they die and clearly spells out the terms. If you have assets, don’t delay. Get a will written today. You can either find a “do it yourself” version on the web or, if your estate is larger or more complicated, find an estate attorney who will prepare one for you.

For more information about estate planning and will writing, go to our website, www.diesmart.com.

What’s UFADAA and why should you care?

We’ve talked several times about the importance of managing your digital assets and making sure your loved ones will be able to access them when you’re gone.

UFADAA stands for Uniform Fiduciary Access to Digital Assets Act. It was developed by the National Conference of Commissioners on Uniform State Laws and is a recommended act that all states are encouraged to enact. The first approved version of the act did not meet the needs of the states and very few of them approved it. However, in late 2015, a revised act was passed. It has several important points:

It gives internet users control. It allows users to specify whether their digital assets should be preserved, distributed to heirs or destroyed.
It provides efficient uniformity for all concerned. Digital assets cross state lines. A uniform law ensures that fiduciaries (the people who are appointed to manage our property when we die or are unable to manage it ourselves) in every state will have equal access to digital assets and custodians will have a single legal standard with which to comply.
It respects privacy interests. It prevents the companies that store our communications from releasing them to fiduciaries unless the user consented to disclosure.
It works hand-in-hand with federal and state law. Fiduciaries must provide proof of their authority in the form of a certified document. Custodians of digital assets that comply with a fiduciary’s apparently authorized request for access are immune from any liability under statutes that prohibit unauthorized access. A fiduciary’s authority over digital assets is limited by federal law, including the Copyright Act and the Electronic Communications Privacy Act.

19 states are considering passing a law that encompasses at least some of what was recommended in the revised UFADAA. You should contact your representatives and urge them to enact this legislation. It will make it much easier for you to manage the digital estate of a loved one after he or she has died.

For more information about UFADAA and other issues related to your digital estate, check out our book ACCESS DENIED: WHY YOUR PASSWORDS ARE AS IMPORTANT AS YOUR WILL.

Are your loved ones protected when you die?

Larry and Susan had been living together for more than 20 years. They never legally married; they said once had been enough. A piece of paper wouldn’t change how they felt about each other. Larry had been married before and had two sons. Susan had also been married previously and she had a daughter.

When Larry’s father became incapacitated, they moved into his house to take care of him. His father, to thank them for all they’d done, left the house to Larry in his will and named Larry beneficiary of his life insurance policy. When his father died, Larry inherited the house and Susan and Larry continued to live in the house. Larry promised to deposit the check from the insurance company into their joint bank account as soon as it arrived.

As Larry was crossing the street on his way home from work one day, he was struck by a car driven by a drunk driver and he died almost instantly.

Larry didn’t have a will and had not left any legal document naming Susan as his heir. They lived in a state that did not recognize common law marriage so, when he died, his sons inherited everything. They forced Susan to move out of the house and refused to give her any of the proceeds from the life insurance policy. In essence, Susan was left with almost nothing!

Families today are very complex. Some are the traditional married mother and father in their first marriage. Many more are couples who were previously married to other spouses or who are legally married gay couples. However, many people live together without benefit of a legal ceremony. This mixture of circumstances makes inheritance much more difficult and complex.

The only way to be sure your loved ones are protected is to prepare a will or a trust naming the person(s) you want to inherit your assets when you die. Otherwise, state law will dictate who receives what. Not you. It’s frightening that more than half of the people living in the United States today do not have a will and have not protected their loved ones. You can find a simple will form on the internet or can meet with an estate planning attorney to discuss the options that are best for you.

Don’t be like Larry. Act now so those you love will be protected when you’re gone. For more information about wills and estate planning, go to www.diesmart.com.