While an estate plan almost always involves a will, there are many arrangements—besides wills and trusts—that control the transfer of money or property. These include the manner in which you hold title to property (e.g., joint ownership), as well as beneficiary designation forms on which you specify to whom some kinds of assets will pass. The importance of beneficiary designations and the titling of property cannot be overstated, because your will or trust has no control over property when an asset or account is jointly owned or has a beneficiary designation associated with it.
It therefore makes sense to examine these "other arrangements" even before we turn to wills and trusts. Think of it this way: your will or trust controls property that is not disposed of some other way. Some of these "other arrangements" are mentioned below. All are familiar and in common use. What these arrangements have in common is that their terms dictate who gets the property at the estate owner's death—not the owner's will or trust.
Joint tenancies with right of survivorship (JROS)
Each of the two or more "tenants" (owners) has an equal interest in the whole account or asset. Most couples own their house and checking accounts in this way. A deceased owner's share automatically shifts to the surviving joint tenant at the moment of death. The transfer of ownership is complete at that point. Nothing the will or trust says makes any difference whatsoever with respect to this property.
Qualified retirement plan benefits and individual retirement accounts
This money goes directly to the beneficiary(ies) you specify when enrolling in the plan or opening the account. Be sure to periodically check to see if the person(s) named are still those whom you wish to receive the money. Your will or trust has no effect on these funds, unless "my estate" or your trust is named as the beneficiary on the beneficiary designation form.
Life insurance proceeds
The policy payoff is part of your private contract with the insurance company, and it should promptly go to whomever you direct, with no court involvement. Again, your will or trust has no effect on these funds, unless "my estate" or your trust is named as the beneficiary on the beneficiary designation form on file with the insurance company. An important note regarding taxes: proceeds from a policy owned by the decedent to a named person as beneficiary are excluded from federal income tax.
Payable on death (POD) bank accounts
The account owner names a beneficiary (payee) who automatically receives the account balance on the death of the owner. Until then, the beneficiary has no rights in the account, since the beneficiary can be changed or the account closed. There is also a transfer on death (TOD) arrangement pertaining to mutual fund, stock and/or bond accounts that works the same as the POD arrangement does for bank accounts.
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