Importance of Asset Titling

A personal lesson learned!

The following illustrates why it is so important to make sure that your assets are properly titled in your will planning.

Recently, as some of you may know, both my parents passed away within four months of one another. My mom has been in ill health for quite some time but my father’s death was sudden and unexpected. My father had established a living trust as a part of his will planning. Everything is transferring smoothly as well as can be expected with one exception ..

As a part of his financial planning my father had purchased four annuities that, combined, paid him about $ 11,000 per month of income. In fact, it was the secure knowledge that he had this lifetime income coming that gave him the freedom to do some serious estate planning ..i.e. .. gifting out much of his estate to his children and grandchildren etc..

These were joint and survivor annuities which meant that as long as either one lived the full monthly income would be paid out by the insurance companies. In addition, one contained a 10 year certain and continuous provision which guaranteed that, no matter what happened, the companies guaranteed the payment of 10 years of annuity payments. This provision was requested by my sisters ( turned out to be a smart move ) because they wanted to be assured that at worst, the insurance companies paid out what was being invested in the annuities.

At the death of my mother we notified all the insurance companies and they immediately sent us a form to designate new beneficiaries ( as long as both of them were alive they were each other’s beneficiary ) except one carrier (Jefferson Pilot ), which for whatever the reason,  did not send out the beneficiary form. It is a sad excuse but I was so swamped that I just signed the paperwork and sent them in.

At my father’s subsequent death all of the carriers that had the proper beneficiary designation paperwork paid out the commuted value of the annuity to myself and my two sisters. Not Jefferson Pilot.  Since there is no beneficiary designation on that annuity it must go through probate. If the size of the annuity is less than $100,000 it would have gone into the trust under the “pour over” provision but the commuted value of this annuity is a bit over $200,000, making it ineligible for the our over.

The following is an e mail from my attorney describing the probate process. We are talking about a cash asset that is locked in due to the ineptness of the carrier and the agent (me!!). In addition, there is a statutory fee to the lawyer .. 4% of the first $100,000 and 3% of the next ..

This illustrates the absolute necessity for living trust and proper titling of the assets ..

From  my attorney:
 

" 

The executor manages the property until the court authorizes distribution.  The process is as follows:

1.  I will send the petition to the court for filing.  A court date will be set about 6 weeks out then each of the beneficiaries will get notice of the hearing.

2.  During the 6 weeks, the beneficiaries can object (we know they won't).  If the court has additional question about the petition, we will file a supplement before the hearing date.  The goal is that no one has to appear at the hearing date and that the petition will be automatically approved.

3.  Once the petition is approved, I will submit an order and "Letters Testamentary" to the court.  These are the documents that detail the executor's powers.  It usually takes  a couple of weeks to get those back.  Once in hand, the executors may take control of the probate assets, sell them, reinvest them, etc., but cannot distribute them to the beneficiaries.

4.  There will be a four month creditor claim period wherein all reasonably known creditors of your father's must be notified of his passing.  The good thing about this is that since you have already paid your father's debts, notifying everyone formally gives them a four month period to make a claim.  If no claims are made, the creditors are barred.

5.  During the creditor period, the annuity will have to be valued by the probate referee (court appointed appraiser) and an inventory and appraisal filed with the court.

6.  After both of these tasks are complete, we can petition the court for distribution of the assets and termination of the probate.  I will assume the three of you will waive any accounting of the assets for the court.

Despite the few steps we need to go through, this whole process will take about 8 months. The estate tax return need not be held up for filing due to the probate estate still being open."

As you can see, the process is time-consuming and complicated. There are additional issues that compound all this as my father held assets and property outside the U.S. We are discovering minor omissions in paperwork and foreign wills which could mean the loss of part of, if not all those assets my father certainly intended to leave to his family and not to attorneys or foreign banks.

I cannot urge you strongly enough to take the time, and take it now, to properly and painstakingly title your assets. Review everything yourself, make a checklist and make certain everyone pertinent to your assets and estate knows all the "what's and where's" . After the loss of a loved one is not the time to be struggling with what "should have" been done.