Estate Planning Why You Need To Know About Account Titling
Account titling refers to who is listed as the owner of an account or property. The simplest example is a bank account. If you and your spouse are listed on the account, then you both own it. But say you want your children to have access to the account, so you list them on it. Guess what? You just made a gift to them according to the tax code. The same logic would apply if you added them to the title of just about any other property. These risks are amplified if you list a minor as the owner of your accounts or as a direct beneficiary. Doing so can inadvertently result in large transfer of wealth to someone who lacks maturity and financial knowledge to properly manage the wealth. Affluent couples need to be cognizant of that risk.
Another potential pitfall involves life-insurance policies. There are various companies offering life settlements and similar type of plans. These schemes sell a person’s life insurance policy to a group of investors. The insured runs the risk of a life-insurance company canceling the policy. The investor incurs triple threat of the insured not signing over his policy, not maintain his or her policy or having the life-insurance company cancel the policy. If you have questions, sitting down with an estate lawyer to review all of your designations may be worth the time and the cost. This is particularly the case for those who have accumulated significant wealth.
Reference: Charles Roblut, Common Estate Planning Mistakes, At A Glance, WJS, January 13, 2015.
Filed Under: Estate Planning; Account Titling; Beneficiary Designations
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