Many “tools” can be used for estate planning purposes, but using the right tool for the right “job” is key, and a person needs to know what they are doing to use them effectively. Many devices work well in combination with a Will or a Will and Trust, but using them improperly can actually frustrate the purposes of a Will or a Trust. Reliance on devices other than a Will or a Trust for estate planning is short-sighted and inadequate and may lead to unintended and adverse results.
One thing that requires close attention when doing estate planning is the way we hold title to our assets. How we own our assets is a key component to estate planning that is often overlooked. For instance, spouses often hold property in joint tenancy with the right of survivorship. That right of survivorship is part of your estate planning. When one spouse passes, the other spouse will become the sole owner of that jointly-owned property. The survivorship principal applies to all joint tenants, regardless of relation. Joint tenants also become present owners of the property.
Bank accounts and investment assets can be made “payable on death” to designated individuals or entities. Payable on death designations (otherwise known as “Totten Trusts”) are an estate planning tool. Payable on death designations provide some limited estate planning utility. If your designated person predeceases you, however, your plan will fail. Payable on death designations also do not allow you to impose any conditions, instructions, or limitations on the transfer of property.
Beneficiary designations are a similar estate planning tool. Assets such as insurance, IRAs, 401(k)s, and other qualified plans allow the designation of beneficiaries. You can designate primary beneficiaries and secondary beneficiaries (in the event the primary beneficiaries predecease you). Beneficiaries designations, however, are also limited estate planning tools for the same reason as payable on death designations, though the ability to name successive beneficiaries extends their utility.
Transfer on Death Instruments (deeds) are another estate planning tool of fairly recent vintage In Illinois. You can now own your home using a transfer on death deed, and name individuals who will become the owner(s) of the property when you die. The same limitations apply to transfer on death designations as apply to beneficiary designations. The named individual(s) must survive you for the tool to be effective.
Land Trusts are another potential estate planning tool. Land Trusts are unique to the State of Illinois, and are often used by investors and developers of property who do not want their names to appear in the title records. A bank is the trustee of the Land Trust, and the individual who owns all rights to the real estate (other than naked title) is the primary beneficiary. The Land Trust document can name successor beneficiaries (as with other trusts) who will take title when the primary beneficiary dies. Land Trusts, however. do not have near the flexibility as Declarations of Trusts (Living Trusts) for estate planning purposes.
These and other various tools have some utility, but the miscellaneous estate planning tools need to be used in combination with more comprehensive estate planning techniques, likes Wills and Trusts, and they must be used to work in harmony with each in order for the estate plan to work together to accomplish the goals a person has. The plans of many people are frustrated by not having a harmonious plan and not working through the various devices and principals so that they all work together to accomplish then intended goals.
If you are uncertain how all of these things fit together with estate planning and need someone to review your estate plan, or help you create on, please contact us. We would love to help you. That is what we do, and we do estate planning for a flat fee so you know what it will cost you up front.