Text Box: DO YOU KNOW HOW YOUR ASSETS WILL PASS UPON YOUR DEATH? By Melisa M. W. Mysliwiec It is important to realize that just because you have established a will and/or trust, your assets will not pass pursuant to the terms of those documents unless you have properly titled your assets and/or designated the proper beneficiaries to do so. This is because upon your death, your assets will transfer in one of the following ways, and in this order: By operation of law to joint owners of the asset; Contractually to your nominated beneficiaries; Pursuant to the terms of your will; or Pursuant to the terms of your trust. Therefore, regardless of what your will or trust provide, an asset that is owned jointly will pass to the joint owner upon your death. Further, regardless of any beneficiary designation that you have made regarding a particular asset, that asset will pass to its joint owner, if any, upon your death. And, finally, regardless of what your will or trust provide, an asset that designates a beneficiary will pass to the beneficiary upon your death. An Illustrative Example: Assume that Jane executed estate planning documents in 2004. Jane has four children: Adam, Beth, Charles, and David. She would like each of her children to receive equal portions of her estate upon her death. Jane has nominated Beth as her agent under her durable power of attorney. Additionally, Jane has executed a will which transfers her entire estate to her trust; and her trust transfers her entire estate to her four children, in equal shares. Jane has the following assets:  *Jane added Beth as a joint owner on her savings and checking accounts so that Beth could assist her with her banking. So, while Jane may believe that all of her assets will pass to her four children in equal shares pursuant to her Trust, in actuality, her assets will pass very differently. Beth will become sole owner of the savings and checking accounts valued at $26,000 because she was listed as joint owner (even though the trust is listed as beneficiary of the accounts). The certificates of deposit valued at $11,000 and $15,000 will pass through the trust because the trust is designated as beneficiary of these accounts. The life insurance policy will pass to Adam, Beth, and Charles because they are designated as beneficiaries of this policy. And finally, the home will pass through probate (pursuant to the terms of her will) because she was the sole owner of this asset. Because her will transfers her assets to her trust, the home will eventually pass pursuant to the terms of the trust, but first, a probate estate will need to be opened and administered to transfer the home into her trust. In the end, Adam will receive assets totaling $64,000 (1/3 of the life insurance policy, plus 1/4 of the trust), Beth will receive assets totaling $90,000 (the savings and checking accounts, plus 1/3 of the life insurance policy, and 1/4 of the trust), Charles will receive assets totaling $64,000 (1/3 of the life insurance policy plus 1/4 of the trust), and David will receive assets totaling $44,000 (1/4 of the trust). It is likely that Jane did not realize that this is what would occur upon her death. Had Jane removed Beth as a joint owner on her savings and checking accounts, and changed the beneficiary on her life insurance policy to her trust, all of her assets would have passed pursuant to her trust and her children would have each received $65,500. Further, had she transferred title to her home to her trust, either during her lifetime or upon her death, this would have passed pursuant to the terms of the trust upon her death without first requiring a probate estate to be opened. *Note: Removing Beth as joint owner of the savings and checking accounts would not limit her ability to assist Jane with her banking because Beth is Jane’s agent under her durable power of attorney. In conclusion, you should make a list of your assets (like above) and determine whether they will pass to joint owners, designated beneficiaries, or pursuant to your estate planning documents. If the end result is not what you planned, contact us to discuss what needs to be changed to effectuate your estate planning goals. It is important to note that each individual’s situation is different, and special care must be taken when designating primary and contingent beneficiaries on certain assets because of the resulting tax ramifications; therefore, to properly effectuate your estate planning goals please contact our office to discuss these issues before making any changes. COBRA Insurance Changes Impact Employers!!! By J. Kevin Winters and Barbara A. Bialko If your company employs 20 or more people…read on. The New American Recovery & Reinvestment Act of 2009 provides significant help in paying COBRA health insurance premiums to employees. Individuals eligible for assistance are required to only pay 35% of COBRA premiums leaving the employer responsible for 65%. Any employee who was “involuntarily terminated” between September 1, 2008 and December 31, 2009 is eligible. Employers are legally required to locate previous employees and provide them with a detailed notice of their right to COBRA coverage. Subsidy is generally available for nine months. Employers will be reimbursed for their share of the premium through a tax credit on their payroll tax returns. If you have questions on how this might impact your company, call Kevin Winters at 517-706-5772

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FOSTER ZACK P.C.

 

FOSTER ZACK P.C.

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Okemos, MI  48864

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