Asset Transfer StrategiesWhen most people are thinking about creating a will, they start by thinking that their will has to contain a list of all of their assets and that it's the only document they need when creating an estate plan. But when you work with a planning professional, you'll learn that there are other strategies and ways to divide up your assets beyond just what's in your will. And actually, using some of these other strategies may make it easier for your beneficiaries to receive the assets and can also be used to avoid tax or other liabilities when they inherit from you.

Generally, there are four different ways that assets can be transferred after your death. The first three can be powerful tools in your estate plan:

  1. A will
  2. Beneficiary Designations
  3. Legal Title
  4. Local Laws

Ways to Transfer Assets

When we talk about "creating an estate plan" it is the general plan and concepts that you want to use to divide your assets when you die. It's like the discussion of systems vs. strategies. Your estate plan is the general system. How you actually transfer your assets are the strategies.

  • A Will ~ The most common document people think of when creating an estate plan. This document serves a variety of roles, including choosing who will be in charge of dividing your assets and lays out a plan for how they should be distributed. If you have young children, you should also use your will to specify a guardian for your children and a trustee to manage any money or other assets they may inherit.
  • Beneficiary Designations ~ For bank accounts, retirement accounts and other assets that offer it, a beneficiary designation is a powerful way to transfer your assets directly to your family members. Instead of the assets being corraled and distributed under your will, the financial institution will directly transfer the asset as you direct in your designations. Especially in the case of retirement assets, this can also be done in a more tax-favorable manner for the recipients of your assets.
  • Legal Title ~ Especially for real estate, this can be an important part of your estate planning. In these cases, the property becomes someone else's property by operation of law. If you jointly own the property with someone and you die, it is simply their property. When you live in a state that allows it, you can even do a Transfer of Death designation so that the property is automatically transferred at the time of your death to someone else. This is like a beneficiary designation for your property.
  • Local Laws ~ This is the "last resort" and while it can be an option for your plan, it's the one option you can't control. If you don't use any of the other strategies, then when you die, the laws of your state will control what happens to your assets. Some people mistakenly believe that since they aren't married or haven't accumulated a lot of things, they don't need an estate plan. In that case, you actually do have an estate plan, but the plan is what the laws of your state say should happen. When it comes to a small saving account with a few dollars in it, that may not be a problem. But when it comes to your children, do you really want the courts to have to decide who they think is most appropriate to take care of your children?

These are the four main ways that property gets transferred after you die. The good news is that as you can see, you have a lot of options and can make sure that your wishes are respected after your gone without leaving a legacy for your family of ugly court battles and large lawyer bills.

Next Steps

You can leave it all in the hands of your local laws, but most people prefer to have some control over the legacy they leave behind. If you're one of those people, let's set up a Legal Strategy Session to discuss the next best steps for you and your family.

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