The three most common ways you can own assets at your death are individually (in your own name), jointly (with at least one other person), or by contract (naming a beneficial owner). Depending on what your goals are during life and after death, how you title your assets could make the difference between financial wealth and financial hardship for your children and/or beneficiaries.
Single Title
Anything you own in your own name at the time of your death must be probated. This includes your home, any rental property, any life insurance policy, jewelry, bank accounts, stocks, cars, baseball cards, you name it, and it’s included. Succession should be avoided at all costs. The probate process is extremely expensive, typically costing your heirs between 4 and 7 percent of the entire estate. The probate process is time consuming, as it can take years to complete and deprive your family of the enjoyment of the assets you left them. The succession process is a public record, which means anyone with a computer can see all of your most personal decisions and the embarrassing infighting that might have arisen from those divisions.
Beyond the dangers of probate, any individually owned assets can be taken from you through lawsuits, creditors, or divorce. Assets titled to your name are not protected and can be easily lost. These assets are also added to your total wealth and are taxed at the wealth tax level for that year. In 2011, the estate tax will be 55 percent. That 55 percent is on top of the 20 to 35 percent in income tax you’ve been paying your entire life. Title property in your own name is very dangerous and unwise.
stamp title
Having your assets jointly titled at the time of your death means the items will automatically pass to the person who shared title with you at the time of your death. The benefit of this form of title is that the jointly titled asset does not need to be probated and there can be no disputes over the proper distribution or currency of the asset. However, the negative aspects of a joint degree far outweigh the positive aspects. Having your assets jointly titled can lead to the loss of certain valuable tax savings at the time of your death. The joint titling also loses any future currency on its assets. If you wanted any of your children or other relatives to someday enjoy your property, they will not be able to do so since you did not retain ownership of the property and you lost your right to gift it to your beneficiaries after your death.
Another disadvantage of joint titling is that you could be stuck with any debt that arises from the property if you are the last person standing. Any real estate mortgage or other debt arising from the property will now fall on you to cover it. Additionally, a jointly titled asset restricts how you can use the property during your lifetime. If you have an equal ownership interest, you may not sell or transfer the property without the unanimous consent of all parties sharing the ownership. This could lead to conflicts and loss of benefits. Joint titling of assets is not ideal.
contract title
Titling your assets by contract is a much safer way to control who ultimately gets your assets. Contractual titling is usually accomplished through the appointment of a beneficiary. Almost any monetary account can have a designated beneficiary. Bank accounts, retirement accounts, brokerage accounts, and life insurance policies all have remaining beneficiary options. By naming your living beneficiary, you can control who receives the income from the account at the time of your death. The benefit of this form of title is that there can be no discussion of your true intentions; there can be no fights between your beneficiaries. While you may not have to worry about losing control of the indenture’s titled assets while you are alive, you will lose a lot at the time of his death.
Any assets held in your name at the time of your death will be added to the value of your estate for purposes of calculating the amount of estate tax. This includes life insurance, annuities, retirement accounts, and any other contractually titled assets.