When creating your Estate Plan, an often overlooked but critical element is to make an inventory of what you own and how you own it. What does that mean? Sometimes you do not own all your assets individually, and sometimes you own them jointly with a spouse or someone else. With some assets, you may not own the asset but you control it, like when you are someone’s agent as designated in a Power of Attorney.
The only assets that your Will can govern are the assets which you own individually or you own a share of at the time of your death. For example, if you and a friend owned a vacation home as tenants in common, you can gift your share of the property to your chosen beneficiaries in your Will. But, if you owned the vacation home with your spouse as tenants in entirety or as joint tenants with right of survivorship, your spouse or the surviving joint tenant would own the property and it would not pass through your Will. In that example, if you wrote your Will to give your share of the vacation home to your child, the title of the property would control the property and not your Will, so your spouse or the surviving joint tenant would get your share of the vacation home, not your child as stated in your Will.
If you create a Trust-based Estate Plan, it is important to make sure that you fund the Trust with the assets that you want controlled by the Trust. For example, say you first create a Will giving your house at 1 Apple Lane to your niece Anna, then later you create a Trust and decide that, due to an argument with Anna, you now want to give your house at 1 Apple Lane to your nephew Adam. But if you don’t transfer the house to your Trust, what happens when you die? If you never changed your Will, Anna gets the house despite the fact that the Trust was created later in time. Why? Because the Trust did not own the house.
You must remember that for the Trust provisions to control your assets, the Trust needs to own the assets. If you created a Trust-based Estate Plan with Gentreo, this problem would have been solved by your Pour-over Will, which would have put any remaining assets owned by you individually, including your house at 1 Apple Lane, into your Trust upon the probate of your Will.
Have you been paying attention?
Pop Quiz: If you owned 1 Apple Lane as joint tenants with right of survivorship, who would get it?
- Your Trust
- The surviving joint tenant
An analysis of how you own your assets is an important part of your Estate Plan. To learn more, check out: The Differences Between a Will-based and Trust-based Estate Plan.