Considerations For Thoughtful Estate Planning

man working on an estate plan

When contemplating an estate plan it is important to remember that a Last Will and Testament is only one tool in the overall approach to a successful estate plan.  Assets distributed pursuant to a decedent’s will are assets in the sole name of the decedent at the time of death.  There are other methods of distributing wealth in the event of death.  Assets distributed “outside” the will are commonly referred to as “non-probate” assets.  Some examples of non-probate assets are:

Title of Property (Real Estate)

If real property is owned by joint tenants with a right of survivorship (JTWROS), the property, in the event of death, will automatically be conveyed to the surviving owner.  In Pennsylvania, for instance, if a married couple wishes for their home to pass to the surviving spouse, they own the property as tenants by the entireties.  By placing “Joint Tenants with a Right of Survivorship” or “Tenants by the Entireties” on a deed, the property owners are ensuring that survivor among them shall automatically receive the property upon the death of the other.

If an owner of real property owns as “Tenants in Common”; however, that owner’s share will be distributed to the beneficiaries designated under his or her Last Will and Testament and not to the surviving owner.

A bank or investment account may also be held by joint owners and the surviving account holder would receive the account in the event of the other account holder’s death.

Designation of Beneficiary

Individual Retirement Accounts (IRA), 401(k) accounts, and Certificate of Deposit accounts (CD) will often have designated beneficiaries in the event of the death of the account holder.  The designation of beneficiaries by the account holder will control the asset transfer in the event of death.  This is accomplished by the account holder completing a written form of the financial entity or institution maintaining the account.  It is important to keep a current understanding of the beneficiaries identified.  Many times beneficiaries die, or there is a change in the preferences of the account holder, but the account holder has failed to update the beneficiary designation form.

Life Insurance Policies and Death Benefits

Life insurance policies, both term and whole life, will have designated beneficiaries.  Furthermore, the decedent may enjoy a death benefit through his or her employment which will often provide for a designated beneficiary.  Again, it is important to update these designations if there is a change of circumstances.

Irrevocable Burial Reserve Accounts/Pre-Paid Funerals

Monies may be deposited in an irrevocable burial reserve account, or a funeral may be pre-paid for the purpose of paying funeral expenses when needed.  In the case of a burial reserve account, the monies are released directly to the designated funeral home upon the submission of a death certificate and invoice for funeral expenses to the bank or financial institution.  (Note that for purposes of Medicaid planning, you should be aware that the Department of Human Services places a limit on the amount that may be deposited into this account.  This limit is dependent on the county in which the decent resided.)

In conclusion, the transfer of assets, pursuant to these and other methods, may affect the contents and distribution scheme provided in your Last Will and Testament.  Therefore, a careful and thorough understanding of a person’s non-probate assets (and how these assets are distributed in the event of death) is critical in formulating an estate plan that meets your goals.