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Filling the Treasure Trust: Making Sure Your Estate Plan is Funded

Anyone who has met with me will recognize this analogy.  In many ways I view an estate plan as a treasure chest.  Importantly, it’s only useful if your treasure is in it.  In estate planning lingo, we refer to this as “funding”.  Funding simply means making sure your treasure or property, in whatever form, goes where and to whom you want it to go on your death.

Funding is crucial to an estate plan that works – regardless of what type of estate planning you do – whether a will plan, a revocable trust plan, or an irrevocable trust plan.  In this post, I will review a few funding fundamentals.

Property Ownership Wins

Property ownership dictates what happens to our property when we die.  For example, if I own my home jointly with someone else (maybe as joint tenants with a right of survivorship or as a tenancy by the entirety in Missouri), when I die the property goes to the person with whom I own it.  The same is true of bank accounts, investment accounts and cars.  If I own them jointly with someone, they automatically pass to that other person when I die.

For example, if I own my bank account jointly with my sister, but my will or trust says all my property goes to my children, the way I own my bank account wins. On my death, my bank account goes to my sister.

Beneficiary Designations Are a Close Second

Like property ownership, beneficiary designations also beat a will or a trust.  By beneficiary designation, I’m referring to a pay on death, transfer on death, successor beneficiary or other similar designation that specifies who property transfers to at death.  For example, on a life insurance policy, beneficiaries and probably successor beneficiaries are listed – the person or persons who receive the life insurance benefit when we die.  On most investment and bank accounts, we can list a beneficiary or beneficiaries, and frequently can also list a successor beneficiary or beneficiaries (the person or persons who would receive the property if the first beneficiary was no longer living).  In Missouri, we can also add a TOD – transfer on death designation – to a car title so that on death a car passes to the person designated.

But just like with property ownership, even if my will or trust specifies that all of my property passes to my children when I die, if I’ve listed my sister as the beneficiary on the property or the accounts instead, my sister gets the property regardless of what my will or trust dictates.

Proper Funding Helps Insure an Estate Plan Works as Intended

If ownership and beneficiary designations prevail over an estate plan, then why bother with an estate plan?  This question is truly at the heart of funding fundamentals.  Regardless of the complexity of an estate plan, proper funding plays a critical role.

What does proper funding mean?  It means making sure all property ownership and beneficiary designations work with an estate plan.  For example, with a will plan, its making sure beneficiary designations and property ownership pass property to the right person or persons at death.  With a trust plan, its making sure property is held by the trust or transfers to the trust (or appropriate person if specific property is not going into the trust) at death.

Making sure ownership and beneficiary designations work with an estate plan is critically important to making sure an estate plan works.

Contact The Estate Planner LLC in our St. Louis office at 314-303-3218 for assistance preparing your estate plan and for any other questions regarding Estate Planning or ElderLaw.

** The choice of a lawyer is an important decision and should not be based solely on advertisements.  This blog post is for informational purposes only and is not legal advice.

Written on August 21, 2022 by Stephanie Copp Martinez, JD

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