An often overlooked step in estate planning is coordinating your assets with your legal documents. Many people believe their Will controls the distribution of all of their property at death. In reality, there are many methods of property transfer at death, and it is essential that all of your assets are aligned with your overall goals.

A Will controls only probate assets and certain real estate. Your Will does not control joint accounts with rights of survivorship or accounts with a “transfer on death” or “pay on death” designation. It also does not control the distribution of retirement plan benefits, life insurance proceeds or annuity death benefits unless the beneficiary designation directs those benefits to your estate (which may have severe tax consequences). Real estate owned by married couples as tenants by the entirety passes automatically to the surviving spouse and is not controlled by your Will. Likewise, real estate owned jointly with rights of survivorship is not controlled by your Will. Lastly, any assets you own in a trust will be controlled by the terms of the trust, not your Will.

What is Asset Coordination?

Asset Coordination is the process of aligning all of the different methods of transfer with your overall goals and your estate planning legal documents. It can include a number of different things, from titling your assets in a way that allows your estate plan to function properly to updating your beneficiary designations on life insurance, retirement plans (401(k)s, IRAs, etc.) and annuities. It may require recording new deeds for real estate or updating corporate documents if you own a business. Neglecting to coordinate your assets with your plan will often result in your estate not working as you intend.

How do You Coordinate Your Assets with Your Estate Plan

There is no one correct way to own your property. The Asset Coordination process will depend on what types of property you own and how your estate plan is designed. You should consult with an experienced estate planning attorney to help determine the best way to coordinate your assets with your estate plan. There are different issues to consider for different types of assets. For example:

  • Bank Accounts: There are several different ways to title bank accounts. They can be owned individually, jointly, or in trust. If you own the account jointly with your spouse or another person, you can provide for a “right of survivorship” that will automatically transfer the account to the survivor at the first account holder’s death. You can also have a “transfer on death” designation on your account that will direct who receives the account upon your death without going through the probate process. Lastly, if you have a trust based estate plan, you can title your bank accounts in the name of your trust. Depending on the design of your estate plan and your needs while you are alive, one or more of these methods of owning your accounts may be appropriate.
  • Investment Accounts: As with bank accounts, investments (including stocks, bonds, mutual funds, brokerage accounts, etc.) can be owned individually, jointly or in trust. Many of the same considerations and strategies are used for investments as they are for bank accounts. However, you will not necessarily want your investments titled the same way as your bank accounts.
  • Life Insurance and Annuities: Life Insurance proceeds and Annuity death benefits are controlled by the beneficiary designation on file with the insurance company. It is absolutely essential that you not only name a primary beneficiary, but that you also identify your contingent beneficiaries. Different insurance companies have different default provisions for what happens if a named beneficiary predeceases you, so it is important that you set forth your own wishes for contingent beneficiaries to ensure your beneficiary designations will work with your overall estate plan.
  • Retirement Plans: Retirement Plans, such as 401(k)s, IRAs, etc., are also controlled by beneficiary designations, not your Will. However, there are additional tax considerations to take into account when structuring retirement plan beneficiaries. It is essential to name primary as well as contingent beneficiaries for all of your retirement plans, and you should consult with your estate planning attorney to not only ensure the beneficiary designations work with your estate plan, but also that they are structured in a tax efficient manner.
If you own a business, have a revocable living trust based estate plan, or utilize beneficiary trusts in your estate plan, there are other issues to consider and steps to take to coordinate your assets with your estate plan.

Final Thoughts on Asset Coordination

Coordinating your assets and property with your estate plan is an essential step in the estate planning process. Unfortunately, most attorneys do not provide a comprehensive asset coordination service as part of their estate planning process. Instead, they draft the legal documents and send a letter instructing you to coordinate your assets on your own with little to no instruction.

Our approach is different. As part of our planning process, we will assist you and work with your other advisors, including your financial advisor, life insurance agent, accountant, etc., to ensure your assets are properly coordinated with your estate plan. If you have any questions about asset coordination, please do not hesitate to contact us.