Secrets of Death and Property Ownership
Estate Planning deals with the distribution of your rights and property during disability, incapacity, and at death. This guide reveals answers to common questions regarding property ownership, the core of Estate Planning here in Baltimore.
How is property owned and transferred at death?There are three different ways that property can be titled/owned and then passed at your death. You can own property solely in your name, property can be owned by two or more people, and property can be held and transferred by a beneficiary designation.
What happens to property at my death when it is held in my sole name?Property that is owned solely in your own name, such as jewelry, cars, and furniture, will pass to your spouse or children by the instructions under your will at your death. If you do not have a will at your death, your property will pass to your heirs under the instructions of the state of Maryland.
How is property transferred at my death when I own property with more than one person?There are different names for jointly owned property:
1. Tenants by the entirety - (must be married to have this type of ownership) If you are married, the property is titled as Tenants by the Entirety. If one spouse dies, the property does NOT pass by the instructions under your will or the State, but instead, passes directly to the surviving spouse, where the surviving spouse becomes the sole owner of the property.
2. Joint tenants with the rights of survivorship - This type of ownership is similar to tenants by the entirety, but you do not have to be married. The survivor takes complete ownership at the other owner's death.
3. Tenants in common - is when two people own property together and at the death of one owner, his share of the property goes to his heirs, not to the surviving owner.
What is a beneficiary designation?Property can be titled where the owners can instruct the transfer of property or proceeds at their death by beneficiary designation. For instance life insurance, annuities, retirement accounts, and POD/TOD (payable on death/ transfer on death accounts) are types of property that have beneficiary designations.
How is property transferred at my death if I have a beneficiary designation?At your death, the life insurance company does not look at your will to determine who the money goes to, instead the company looks at your beneficiary designation form. The company contacts the beneficiary and sends him/her your property amount. This type of property passes outside of your will.
What are the disadvantages of beneficiary designations and what problems can arise?1. Decedent loses control - when the decedent's beneficiary comes to settle the estate, a lump sum check comes directly to the beneficiary. Yes, money has an effect to warm and comfort, but it also can burn and destroy. If you let anything pass under the beneficiary designation, instead of the trust, you have lost complete control.
2. Unintended beneficiary - Sometimes individuals do not change their beneficiary forms after a life-event, and leave money unintentionally to an ex-spouse or a deceased person.
3. Beneficiary is too young - If the beneficiary is a minor, the bank or the insurance company will not be able to pay the recipient of the policy proceeds. A guardian or conservator will need to be appointed by the court and held until the child reaches 18 or 21.
4. Old enough, but too young - In some cases, the beneficiary may be old enough to receive the money, but not responsible enough to manage it. There was a study done by an the Car Dealer Association and they found that it only takes 19 days after a family member passes for the beneficiary to purchase a new car with life insurance proceeds.