Often Overlooked Estate Planning Details

By Crystal Wipperfurth, CRPC®, Wealth Advisor

Estate Planning is Still Important

The recently passed Tax Cuts and Jobs Act raised the estate tax exemption to $11.2 million ($22.4 million for couples). While fewer families will now be subject to estate tax, estate planning, the process of preparing instructions for how your personal assets should be administered and distributed after your death, remains a necessary task. More than just the writing of a legal will, estate planning can provide legal clarity to final wishes, name beneficiaries of assets, and outline terms of care in the event of incapacitation.

As the process of creating an estate plan can be complex, there are some basic but important details that one should consider in order to ensure the smoothest possible execution of an estate after death. While you may not personally see the benefit of a well drafted estate plan, your family and other beneficiaries will surely be thankful for a smooth process when the administration of your estate doesn’t incur unnecessary cost or time.

Avoiding Probate

Many of the decisions made in an estate plan are designed to avoid probate, the legal process undertaken by the state to review your will, verify the authenticity of documents, settle your estate, and ensure property is rightly distributed. Avoiding probate is desirable because it means avoiding court fees, the expenses associated with hiring a lawyer, and the time involved in a potentially lengthy legal process.

There are several ways in which you can design your estate plan so that your property can pass on to heirs and beneficiaries without a probate process. Having a well-crafted will and naming beneficiaries on all retirement and insurance accounts is a starting point.  Trusts are also common.

Trusts Have Become Popular Components in an Estate Plan

A trust is the means by which a grantor (the creator of a trust) outlines how to manage and distribute his or her assets. Some trusts are living, taking effect while the grantor is still alive. Other types of trusts are only executed after the grantor’s death. Assets placed in most types of trusts will avoid probate.

Trusts are also popular vehicles for avoiding estate taxes, or at least to reduce the amount owed in taxes. By placing assets in a trust, you are effectively removing them from your estate and therefore protecting them from taxes owed on amounts over the current estate tax exemption. Although the assets placed in most trusts will no longer be accessible during your lifetime, trusts an effective way to shrink the size of your estate and avoid further taxation on your wealth.

Outdated Beneficiaries Can Overwrite the Statements in Your Will

The naming of beneficiaries is an important part of any holistic estate plan. Your estate plan should name beneficiaries – usually a spouse, children, close family members, sometimes even close friends – who will receive funds, property, or other benefits from your will, contracts, or insurance policies. However, what can become a surprise is that any beneficiaries you name to specific assets, like a health insurance policy, will supersede statements in your will. For example, if your will names Uncle Bob as beneficiary for your Roth IRA, but Uncle Joe is listed as the beneficiary in the official account records, then the assets will be given to Uncle Joe, even if your will is the newer document. In other words, don’t forget to update beneficiaries to align your will with various assets.

Location, Location, Location!

When formulating your estate plan, it will be important to consider the physical location of all of your assets. While the majority of your property may be listed in your permanent state of residence, it is not uncommon to hold property in another state – a lake house, yacht, or other real estate, for example. Ancillary probate will occur when a decedent owns real estate or tangible personal property in different states at the time of death. Overlooking property in other states will likely trigger ancillary probate proceedings in order to settle the ownership of that asset. While your intention may be to avoid probate in the state where the majority of your property is listed, be careful to consider how assets in other states will be passed on to beneficiaries. Placing property – regardless of location – in a living trust is usually an effective way to mitigate ancillary probate.

Know How Your Life Insurance Policy Will Affect Your Estate

The proceeds generated from your life insurance policy are included as part of your gross estate for tax purposes. If you fail to properly account for life insurance in your estate plan, your beneficiaries may be face a larger estate tax bill thanks to those proceeds. One way to avoid this is with a special trust, an irrevocable life insurance trust (ILIT). Instead of being included in your estate, proceeds from your life insurance will automatically be placed into the trust after your death.

Properly Title Your Assets

A critical but often overlooked aspect of estate planning is titling, the legal term for asset ownership. The ownership structure of an asset will ultimately determine how much of the decedent’s property is included in their taxable estate and how much is passed directly to the beneficiary without probate. Titling, however, is governed by state laws, so while we can speak generally about certain asset ownership structures, it will be important to discuss asset titling in your state with your trusted financial advisor.

Fee Simple titling means that the property is held in one person’s individual name. The gross value of the asset is included in the decedent’s estate and is subject to probate.

Tenancy in Common titling means that two or more individuals each retain a percentage of the asset’s interests, which may not be proportional. The percentage of the individual’s ownership is included in both gross and probate estate – i.e., if you own 30% of the property, then 30% of the asset’s value will be included in your gross and probate estate.

Tenancy by the Entirety titling means that the property is divided equally between two spouses. Under this arrangement, neither spouse has the ability to dispose of the property without their spouse’s consent. 50% of the property’s value will be included in the decedent’s gross and probate estate.

Joint Tenancy with Rights of Survivorship (JTWROS) titling means that two or more persons hold the same property in equal percentages. Under this titling structure, property can be jointly held with or without the spouse. If held with the spouse, then the rules of Tenancy by the Entirety apply. If held with a non-spouse, then your percent contribution to the purchase price will be included in your gross estate and is not subject to probate until the death of the last living tenant.

Community Property titling means that property is communal – equal division of ownership – between spouses. 50% of the asset’s value will be included in both your gross and probate estate. This titling only applies to states with community property laws, currently: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin.

Final Items to Consider

A well strategized estate plan will maximize the unified estate tax and gift tax credit. Employing a gifting strategy to your estate plan is not only an effective way to reduce the size of your taxable estate, but it will also help distribute your wealth to the individuals or non-profit organizations you feel passionately about.


Death is a reality of our human existence. Preparing your estate plan will not only bring peace of mind to you, it will bring significant relief to those who have to execute your will after your death. Taking the time to craft an estate plan that covers all of the basics can also potentially save you significant sums of money and time by avoiding probate and minimizing your taxable estate. As always, consult the advice of your financial advisor to optimize your estate plan based on your state laws and your particular property holdings.

Bronfman E.L. Rothschild is a registered investment advisor (dba Bronfman Rothschild). Securities, when offered, are offered through an affiliate, Bronfman E.L. Rothschild Capital, LLC (dba BELR Capital, LLC), member FINRA/SIPC.
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