A well-crafted estate plan ensures your wishes are carried out and provides a sense of security and peace of mind. People often invest significant time and money in their estate plans. Still, they may overlook a crucial aspect: the transfer method of assets. 

There are four methods to transfer assets at death properly:

• To the joint owner of an asset
• To a designated beneficiary
• Through provisions of a trust
• Through provisions of a Will and the probate court process (for assets not transferring via the above methods)

Account Titling

Certain assets, such as investment accounts and real estate, pass at death according to their titling (or ownership). If owned jointly with the right of survivorship, the asset will automatically transfer to the joint owner upon death (bypassing the estate planning documents). If owned by a trust, the asset will follow the trust’s provisions (as discussed below).

Beneficiary Designations

Qualified retirement accounts and life insurance policies pass by beneficiary designation. Non-qualified accounts (such as bank or investment accounts) often have the option to add a Transfer on Death (TOD) or Payable on Death (POD) option. A beneficiary deed can usually be added to real estate assets to transfer at death. The choice of beneficiary for an account depends on your unique situation, and we recommend consulting your attorney to make sure they align with your estate plan. 

We recommend maintaining copies of all beneficiary forms in your files and confirmations that they have been processed. If you do not receive a confirmation, we recommend contacting the company to confirm that they received the request and that the change has been processed. Failure to update beneficiary forms can lead to unintended distribution of your assets. Sometimes, the current beneficiary will be displayed in the online access for the account, making it easy to verify. We also request that you forward a copy of any changes to our office so we can keep your file current. 

Trust Funding

Your estate plan may include a revocable trust. Trust funding is the process of ensuring assets will transfer at death per the overall plan. While trust funding can be time-consuming, it is a vital step that guarantees your assets are transferred to the trust as your attorney advises. Depending on the type of asset, this process may involve naming the trust as the beneficiary or retitling the asset into the name of the trust. In trust-based estate plans, we observe a variety of methods used by different attorneys. For example, naming an individual first, and then the trust as a contingent beneficiary. Therefore, it is crucial to consult with your attorney to ensure your designations align with your overall estate plan. This is particularly important if qualified retirement plans or life insurance make up most of your estate. 

Assets such as investment accounts and real estate can be retitled into the name of the revocable trust. Additionally, there is typically a pour-over provision in wills. This provision ensures that any assets not titled in the trust at your death are ‘poured over’ into the trust, becoming part of it, and distributed according to its terms. Your attorney’s guidance will give you the support and direction you need during this process.

Note on Safe Deposit Boxes

An important item to address is your safe deposit box. While you cannot add a beneficiary designation to a safe deposit box, you must have at least one other person (typically your spouse or named Executor) on the box to ensure someone can access it in the event of your incapacity or death.

To keep your estate plan updated, reviewing account titling and beneficiary designations after significant life events is important. Marriage, death, divorce, birth in the family, or simply changes in your family dynamics are all reasons to take a fresh look. Even without significant life changes, reviewing your estate plan and beneficiary designations is recommended every 5 to 10 years. This proactive approach will ensure your estate plan operates as intended.

As always, we are here for you. While we are not attorneys and cannot draft documents for you, we can help you identify key areas in your estate plan that may need to be addressed. Please email or call if you want to set up a Zoom videoconference meeting or talk by phone.

Mary McCraw, CFP®
Vice President

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The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

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