Dealing with one's mortality has always been somewhat of a
difficult hurdle to jump over. Most of us wait until death is
persistently knocking on our front door, before we acknowledge that there is
some preparation that is required of us. The fear of the unknown scares
the majority of us into shutting down the whole process. Preservation of ones' wealth makes it a
necessary evil, an inevitable process. Avoiding burdening our loved ones
with handling all our financial problems, problems that we could have handled
ourselves prior to death, gives them time to mourn our passing instead of
cleaning up after us.
Once someone said to me people with long-term illness are lucky in
a horrible way, because they are stopped in their tracks and made to face their
mortality, while the rest of pretend the day will never come. Waiting
until one is terminally ill is something of a gamble because you are working on
the assumption that you are 100% sure you will get a warning of sorts. I personally
feel if we learn to live our lives to the fullest - each day as though it was
the last but also as though it was the beginning of something new; this will
make it somewhat easier to be prepared for the inevitable. Do not procrastinate
living your dreams least you run out of time.
You work so hard to acquire the property that you have and should
want your loved ones to get as much of it as possible. There are plenty
of instruments available that afford you the opportunity to protect your assets
and ensure that the people you wish to inherit your wealth are the ones the
ones that ultimately inherit it. In the absence of clear and direct
instructions upon your death your property becomes subject to probate.
Meaning legal proceedings, directed by the courts, will determine who
inherits your property. This can be a very costly, long and confusing
process for your loved ones to endure.
I had a client once who fought a long battle with cancer. She had
two siblings, one told her she needed to make alternative arrangements for her
own care that did not include them, because they felt not well equipped to deal
with her illness nor the inevitable death. The other sibling practically gave
up their own lives to be her primary caregiver during her last days. Being
single and never had any children (now not there are any guarantees that your
children will readily look after you should you need it either) absence of
family can make a bad situation worse. During our many conversations she
would reiterate how she wanted Marybeth, (the sibling looking after
her) to inherit all her assets, and to ensure that Sarah got nothing.
Sarah's absence during her sister illness was difficult to accept.
With all the planning, having all her accounts to transfer-on-death,
there was unfortunately an account that she had forgotten about. The
account went into probate and was split between her two surviving siblings,
following the law but totally against the deceased dying wishes.
The most economical way of avoiding probate is by making use of
the Transfer of Death Instruments that are available. Now most of these are
revocable, meaning should the family member that you named either predecease
you or falls out favor, you can change this at any time. It is important
to note that you need to do the necessary research, ensuring however you decide
to title your property it is within the laws of the state or country you reside
in. Should you have property in a different State to your resident state, then
it is the laws of the State where the property is that you follow and not where
you are resident.
There are many instruments available, where you reside, in the
case of real estate property will determine which instrument is better suited
for you. For example in Illinois, 2012 saw the introduction of Illinois Residential Real Property Transfer on Death
Instrument Act.(755 ILCS 27/) - which permits an individual to
pass ownership at death to another person at a minimal cost. You would
approach your local There similar instruments for vehicles too, but in
this case you would need to approach your local DMV so that the name of your
beneficiary is added to the certificate of registration.
For brokerage accounts (holding securities such as stocks, bonds,
mutual funds) you can use Transfer-On-Death registration. Again this can be
changed at any time should your situation change and require it. Bank accounts
use Payable-On-Death but you need to request for the necessary forms to have
this on file from your bank. It is important to note that if done this
way it does not give the named beneficiary access to the account during your
life time. Upon your death they will be required to produce proof of
death along with appropriate identification to transfer the funds to their
name.
Retirement accounts are handled differently, depending of course
on your resident state as well as whether you are married or not. You will need to research on your residence
state requirements. With IRAs (Individual Retirement Accounts) it is
advisable to do this at the time you open the account. Some brokerage
houses will insist you name a beneficiary when you open your account, but sadly
this is not the norm. It is most advisable you make a point of reviewing
the beneficiary designations on all your retirement accounts at the earliest
convenience. For 401(k), Profit Sharing Plan, Defined Benefit Plan you
will need to contact the third party administrator who handles the plan.
If you are not sure who that is, your human resources department should
be able to point you in the right direction.
As
with other transfer-on-death registrations/instruments, with retirement accounts
the designations are revocable of course, but they do also offer the
possibility of appointing contingent beneficiary in case your primary
beneficiary predeceases you. For some states Spousal Consent maybe
required, if you do not name your spouse as 100% primary beneficiary. The
following states do not require you to notify your spouse should you wish to
make any changes: Alabama, the District of Columbia, Colorado, Georgia,
Indiana, Kentucky, Maryland, Mississippi, Montana, Nebraska, New York, North Carolina,
North Dakota, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah,
Vermont, and West Virginia
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