Asset titling is a crucial part of your estate plan. Appropriate titles can help you ensure that your assets and investments get distributed in the way you intend, whereas careless titling or mistakes can have unintended consequences.
Per J.P. Morgan, asset tilting simply refers to the way in which you own an asset. You can own it individually, jointly or indirectly, such as through a trust. Titling can affect the way in which the government taxes you, who will get your assets when you pass, whether creditors can claim your assets and who ultimately controls them. When titling, you can employ several techniques. It is important that you understand each so that your efforts align with your estate planning goals.
Putting assets into your own name is the easiest way to title them. When in your name alone, the property is under your complete control. While there are many perks to maintaining sole ownership of an asset, there are a few drawbacks. For instance, assets in your possession can become subject to creditors’ claims. They also remain part of your taxable estate once you pass away. Likewise, they may affect your ability to receive Medicaid for nursing home care, as they increase the value of your countable assets.
Joint ownership is precisely what it sounds like — when you own property jointly with one or more persons. There are three may ways you may own property jointly:
- Joint Tenants-in-Common: In this situation, you own half or a portion of a specific asset. Should you pass away, your share of the asset passes through your estate and not to the joint owner. Though “separate” for estate planning purposes, each tenant-in-common’s share is subject to the other’s creditors.
- Joint Tenants With Rights of Survivorship: In this arrangement, both you and the joint owner have complete control over the asset during your lifetimes. However, should one of you pass away, the entirety of the asset passes to the surviving joint owner without the need for probate.
- Joint Tenants by the Entirety: Though not available in all states, and though not perfect, this arrangement is similar to the one above but offers considerably more protection against creditors. However, when one owner dies and the other assumes full control of an asset, the asset may become subject to the surviving debtor’s creditor claims.
Pay or transfer on death
Though the name could use some work, pay or transfer on death account allows you to maintain full control over an asset during your lifetime. Upon your death, ownership will pass to a beneficiary without the asset having to go through probate.
A trust offers one of the best and safest ways to title your assets, protect them from liabilities and ensure they pass to whom you want. An experienced lawyer can help you establish a trust and properly name your assets in the early stages of the estate planning process.