What’s in a Name?

older couple doing paperwork

Be sure yours is correct!

Let’s talk about your name. You may love your name, or think it’s just okay, or wish you had a different name, and these days, you can legally change your name if you want. BUT that’s not really the name that we need to make sure we get correct. I am referring to the legal name, aka title, on everything you own from your home or other property, to bank accounts, your vehicle, and investment accounts. So what’s in your name?

Okay, so that’s probably not as much fun as you had in mind, sorry! But I cannot stress enough how important it is to get those “names” correct! In the United States, what’s listed on the title of an asset (an asset is anything you own of value) will dictate where it goes after you are gone. A great exercise is to take a look at every asset you have and ask yourself “Where do I want this to go?” then make sure the title reflects that. So, since this month’s financial open house takes us to the attic, let’s dust off those items we normally put off until later and take a look at some examples of what you should be focusing on now.

Account Title Options

A common asset title we are often familiar with is a Joint with Rights of Survivorship ownership (sometimes abbreviated as JWROS). If you are married, for example, often your bank accounts are titled this way, so if something happens to one of you, the other seamlessly remains the owner of the account.

But what if you are single so your bank accounts are just in your name? You can still “tell the account where you want it to go after you’re gone” by adding a POD (Payable on Death) designation if it’s a bank account or a TOD (Transfer on Death) designation if it’s a non-retirement investment account or piece of property (like your home or even your vehicle in some states). What you are essentially doing is adding a beneficiary designation to a non-retirement account, simply by filling out and signing a piece of paper at each institution.

Lastly,  if you have a trust in place as part of your estate planning documents, your attorney often recommends “funding your trust” which means re-titling your non-retirement assets into the name of the trust. I never liked the word “funding” because to me that sounds like there are costs involved, but the only cost is your time in getting the paperwork completed. You still have control, your financial power of attorney is also now referenced on that account in the trust document, and you save significant time, cost and headache for your heirs by doing this now vs leaving it to them to deal with it later.

Why is This So Important?

To motivate yourself to take care of this paperwork, it is helpful to understand why you should care about correcting your asset titles. If there is no joint owner, trust owner or “beneficiary” on a non-retirement account, it may have to go through the probate process (depending on the dollar value of the account and your local probate laws). Probate is a court process of dealing with the estate of someone who has died, which generally means clearing debts, valuing assets, and then distributing them in accordance with the will/trust. Settling an estate can often take 6 months to three years. Probate means there will be an additional delay and added costs involved before distribution to the new owner(s). So if you can avoid delays and added costs (probate) by simply signing a form, wouldn’t you do that?

But This is Where Most People Fail!

Having helped families for the past 20 years with all aspects of financial planning, I would have to say that this estate planning “homework” piece is the most misunderstood and biggest back burner item for everyone that I have met with. It is usually a case where we don’t know what we don’t know. This is why I wrote several little financial checklist books (purse size, bullet point checklists) to help avoid the most common estate planning mistakes. It might seem like an overwhelming task but that is why I help break it down into small manageable pieces. Also, your attorney should explain in more detail the estate planning homework after you have signed your documents.

Estate Planning Homework

Once your documents (typically a will/trust, powers of attorney for financial and health care) are signed, families should update their asset titles (to trust, joint, or TOD/POD) on non-retirement accounts as well as update the beneficiary designations on retirement accounts and insurance contracts. You want to assure that all of those assets go to the same places you designated in your will/trust.

Remember, a beneficiary designation is like a mini-will on each individual account. Your IRA, for example, will not go to where your will/trust says, it will go to where the beneficiary form on file on that IRA account tells it to go. This is why one woman I met with recently watched her deceased husband’s 401(K) go to his brother instead of her. He had never updated his beneficiary designation at the police department after they got married decades ago!

Also, naming a primary as well as a contingent beneficiary is usually a wise practice on those accounts too. The best news is that beneficiary designations provide for distribution without a probate process so there is no delay or added cost on those accounts/policies/contracts.

You can do it!

Whew! I know all this can feel overwhelming but you just need to take the first steps. A great resource we have available is our Writing a Will worksheet to help you with some essential decisions to review in your current will or to consider and have ready before you have a will put in place. Plus, check out our other free resources to help you get your “names” correct. It can really make a significant difference for your family in the end!

Marie Burns is a Certified Financial Planner, Speaker, and Author of the bestselling Financial Checklist books. Find Marie on Facebook or contact her at Marie@MindMoneyMotion.com

This article was first published at 60 and Me – a community that helps women over 60 live happy, healthy and financially secure lives.

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