What’s in a title? A lot more than people realize when it comes to estate planning, advisers said.
Fewer than half of Americans have any estate planning documents — and of those who do have a will or trust, 14% have never updated it and another 13% update only every 10 or more years, according to Trust & Will. That means more than a quarter of people with existing plans are likely carrying stale beneficiary designations.
Beneficiaries are those you name to receive your assets after death. Naming beneficiaries and properly titling accounts are among the most common estate planning gaps, advisers said. Titling is how assets are owned and controlled during life — jointly with someone else, individually, or in a trust, for example — and can, like designated beneficiaries, determine who receives the asset after death.
Both beneficiary designations and titling can pass an asset outside of probate and a will. So how an account or property is titled or left to an heir can override what estate documents say. Neglecting these details can impact probate — a potentially lengthy, costly, and public court-supervised process to settle an estate — as well as taxes and the people you intended to receive your assets.
“Titling is the number one thing missed in trying to make sure an estate plan is distributed in the way people intended,” said Shannon Stevens, managing director and head office at Hightower Signature Wealth. “It’s very, very important to make sure to understand the implications of how assets are titled.”
How Can Improper Titling or Beneficiary Designations Hurt?
Incorrect or missing beneficiary designations and improper titling can lead to distribution delays, misdirected assets, and extra costs, advisers said. Here are some examples:
- Not updating beneficiaries could mean someone you didn’t intend to receive your assets could inherit them. For instance, an ex-spouse could inherit an asset instead of the current spouse because the beneficiary designation wasn’t updated after a new marriage.
- Naming no beneficiary forces your assets through probate, delaying distribution and incurring unnecessary legal fees.
- Listing a minor as a primary beneficiary results in a court-appointed guardian — since minors cannot legally manage assets — meaning delays and administrative costs.
- A bank account not titled as “joint tenants with right of survivorship” (JTWROS) and with no designated beneficiary will likely go through probate, which can temporarily leave a surviving spouse without access to funds.
- An investment account titled JTWROS with a second spouse would pass automatically to that spouse — potentially overriding a will that intended the account to go to children from a prior marriage. “We see that frequently,” said Anthony Fittizzi, wealth strategies executive at Bank of America Private Bank. “It could jump over the estate plan.”
Does a Will Determine Who Gets What?
A will does map out how your assets are distributed, but assets that rely solely on a will usually must go through probate, advisers said.
“The goal is to have everything named that you possibly can, and hopefully, the will is just a supporting piece that’s there just in case — a supporting role in extreme situations,” Stevens said.
The best approach: title accounts appropriately and name beneficiaries on all major assets — homes, retirement and investment accounts — and let the will capture anything that’s overlooked or less valuable, like an everyday car or household items, Fittizzi said.
A will is also essential when any heirs are minors. Minors can inherit assets but can’t legally manage large sums and would require a guardian. A will lets you appoint the right person; without one, the court will appoint a guardian in a potentially lengthy and costly process.
“So, wills are important so you can appoint the right people — people you know and trust,” Fittizzi said.
How Should You Title and Designate Beneficiaries?
The right approach depends on how you want your assets to flow, advisers said. Start with the basics: a will and healthcare and financial powers of attorney.
If you have more complex assets — real estate, business interests, or valuable collections — and want to avoid probate while keeping your estate private, also consider a living trust. A revocable trust holds any assets you put into it; you maintain control while alive, and it carries specific instructions for distributing them outside of probate after death, Stevens said.
From there, review how each asset passes at death — through probate or outside of it — and to whom, depending on how it’s titled and who is named as beneficiary.
For example: JTWROS assets automatically pass to the joint owner, and assets with a designated beneficiary pass to the named person — both outside probate. However, individually-owned assets without a named beneficiary, or assets titled as tenancy in common, must go through probate and follow the will.
“Look at the difference of ownership and map out your situation,” Stevens said. “Do you like the outcome or not? If not, change it.”
Once a baseline is established, Stevens recommends revisiting and updating your designations after every major life event — like a divorce or marriage — or at least every year or two even when nothing significant has changed.
Medora Lee covers money, markets, and personal finance for USA TODAY.
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