Upon the death of one person, the remaining person becomes the sole owner of the accounts. By gifting money to your loved ones while you are alive, you reduce the amount of assets that would normally pass through probate upon your death. Unfortunately, due to probate fees, legal fees, and estate taxes the amount was reduced to a paltry $3 minnion. This could have been avoided with the use of proper estate planning tools. Probate is the legal process in which a court oversees the distribution of property left in a will. By having the proper trust drawn up by a legal advisor, your assets can be re-titled to the name of the transfer 401k trust. Upon the proof of death of John and Mary, the account will be transfered to Jane. If you are single, it is likely that your bank and investment accounts are titled only in your name. Thsi amount is expected to increase in the future. The assets and property are then owned by the trust that do not have to pass through the probate court and go directly to the beneficiaries, relatively quickly. Not many people enjoy discussing what they want to happen upon their death, however, the thought of your family and other heairs not getting what you want them to have is equally distressing. If you are passing your assets directly to certain people immediately upon your death, the easiest way to avoid the pitfalls of probate and the expense of an attorney is to directly name a beneficiary on the account. Another option is to give yoru assets away to your heirs while you are living. However, accounts that do not fall into the above categories require a different tactic. At that time, Jane shoudl re-title teh account to name her own beneficiaries. Even if you're able to protect all of your assets from probate, you may still need a will to address matters that may not be covered by other legal devices, such as naming the guardianship of your children in the case of your death. Joint tenancy, which is most popular among married couples, allows two people to have equal ownership of their accounts. Most of us remember when Elvis Presley, "The King:, died in 1977. By reorganizing your assets, you can help avoid probate for your heirs. Transferring property of any significant value could have tax ramifications (estate, gift, or capital gains) that an advisor can make you aware of. An example would be titling a mutual fund account as "John Doe and Mary Doe, POD Jane Doe. At that time his estate was worth an estimated 10 million dollars. In the event that an estate must go through theprobate process, the named executor of the will represent the deceased person in order to receive a legal document called letters testamentary, allowing them to pay any outstanding debts and funeral expenses, file necessary tax returns, and transfer the titile, or name, on the accounts to their respective beneficiaries. Another method of avoiding probate that could have been used in this case is the use of revocable or irrevocable trusts. As of 2008, you can make a tax-free gift of $12,000 per person to as many calculate retirement savings people as you want. This approach is to use a Payable On Death (POD), Transfer On Death(TOD), or In Trust For(ITF) designation in the title of the assets. To properly plan your estate, you should use the help of an estate planning attorney and a competent financial advisor. Individual and corporate retirement plans (individual retirement accounts (IRA's), 401k's, 403b's, etc), fixed and variable annuities, and life insurance policies are examples of accounts that include a beneficiary designation form.
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