Titling Assets: The Critical Step After Estate Docs Are Signed

Summary

Podcast Summary: "Titling Assets: The Critical Step After Estate Docs Are Signed"

Episode Release Date: June 10, 2025
Podcast: The Practical Planner
Host: Thomas Kobelman
Co-Host: Dave Haughton
Production: wealth.com

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Introduction

In this insightful episode of The Practical Planner, hosts Thomas Kobelman and Dave Haughton delve into the often-overlooked yet crucial aspect of estate planning: titling assets. They emphasize that while setting up estate documents is essential, ensuring that assets are correctly titled to reflect these documents is equally important to avoid unintended probate and administrative complications.

The Importance of Titling Assets

Thomas opens the discussion by highlighting titling as a significant pain point in estate planning. He states:

"I think it's actually the almost the biggest pain point in estate planning... there's all the conversations about, what's an estate plan if it never gets funded? And part of funding is also titling..."
[00:11]

Dave agrees, noting that many clients establish a trust but fail to transfer their assets into it, leaving the estate plan incomplete:

"A lot of times if a client goes to see an attorney, they get their trust in place... they forget by the time they reach the parking lot, right. And nothing ever gets in."
[01:49]

Bank Accounts

The discussion begins with bank accounts, where Dave emphasizes the necessity of titling non-qualified assets in the trust’s name to avoid probate and complications during incapacitation.

"You need to set up... any non-qualified assets in accounts you want to be in the name of the trust... instead of TOD."
[02:45]

Thomas expands on the practicality, acknowledging that clients often have multiple accounts:

"We have multiple savings accounts... do you maybe see this as like... the main account you're operating in plus what's like kind of the big savings account?..."
[03:18]

Dave adds that while prioritizing larger accounts is essential, overlooking smaller accounts can inadvertently trigger a full probate process:

"But if you leave too much out, you could cause a full blown probate, which is what you're trying to avoid in the first place."
[04:44]

Qualified Accounts

Moving to qualified accounts such as IRAs and Roth accounts, Thomas points out the limitations in titling these accounts in the trust’s name:

"How do we do it there? ... you're not able to title them in the name of the trust."
[09:27]

Dave explains the standard approach of naming a spouse as the primary beneficiary to leverage unique tax benefits. He also discusses scenarios where naming the trust might be beneficial, especially when dealing with minors or dependents with special needs:

"The spouse usually carries with it really unique benefits under the tax law to be the direct primary beneficiary."
[10:02]

Non-Qualified Accounts

In the segment on non-qualified accounts, Dave reinforces the importance of retitling these accounts into the trust to ensure seamless asset transfer and avoid probate.

"What I found is that the process for transferring to a successor trustee is far easier than with a power of attorney."
[15:28]

Thomas reassures listeners that retitling these accounts is generally straightforward, often requiring only the trust’s certification.

"You just have to retitle it with them... it's really not some hard thing to do."
[16:00]

Business Ownership

The conversation shifts to business ownership, where Dave highlights the complexities involved in transferring business interests into a trust, especially with entities like S Corporations:

"You might say, yes, I want my business to own my trust asset... what if it's an S corp?"
[17:02]

Thomas asks for clarification on potential downsides related to S Corporations, prompting Dave to discuss eligibility and compliance issues:

"There are restrictions... you don't want to disqualify your S Corp simply because you put it into a trust."
[18:30]

Private Investments

Addressing private investments, Dave emphasizes the necessity of evaluating each investment’s unique restrictions and ensuring compatibility with trust structures:

"When it comes to private investments and alts, they have all different kinds of subscription information..."
[19:40]

Thomas shares a real-world example indicating the challenges investors might face when integrating complex assets into their estate plans:

"They can't do any estate tax planning because they've been told by SpaceX that they already have the max number..."
[20:18]

Life Insurance

In the final asset category, life insurance, Dave discusses the flexibility and considerations when naming a trust as the policy’s beneficiary or changing its ownership:

"You can change the ownership of a life insurance policy into a trust... it depends on what type of life insurance you have."
[21:06]

Thomas underscores the importance of coordinating with advisors to navigate the nuances of life insurance in estate planning:

"It's something again to talk with your advisor about."
[22:04]

Conclusion

Wrapping up the episode, Thomas and Dave reiterate the critical role of advisors in ensuring that estate plans are fully funded by correctly titling assets. They stress the ongoing responsibility of advisors to assist clients in systematically transferring assets into their trusts:

"Our job is to help make sure everything gets funded because we're working with them on a yearly basis."
[22:51]

Thomas encourages listeners to engage with their advisors and estate planning attorneys to navigate the complexities of asset titling, ensuring that their estate plans work as intended.

"Hopefully this helps... you're one of your biggest roles is how do I help after the estate documents are drafted."
[22:50]

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Key Takeaways

1. Titling Assets is Essential: Establishing estate documents without correctly titling assets can lead to probate and unintended distributions.
2. Prioritize Major Accounts: Start by retitling significant bank and investment accounts to avoid major probate issues.
3. Qualified vs. Non-Qualified Accounts: Understand the differences and limitations in titling various account types within a trust framework.
4. Complex Assets Require Careful Planning: Business interests and private investments need specialized attention to align with estate planning goals.
5. Life Insurance Considerations: Properly naming trusts as beneficiaries or adjusting ownership can enhance the effectiveness of life insurance in estate plans.
6. Advisor Collaboration is Key: Continuous collaboration with financial and legal professionals ensures that estate plans remain comprehensive and effective.

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This episode serves as a comprehensive guide for advisors and clients alike, emphasizing the importance of meticulous asset titling in estate planning to ensure that one's wishes are fully realized without unnecessary legal complications.

Transcript

[Dave Haughton]

Foreign.

[Thomas Kobelman]

What is up? And welcome back, everyone, to another episode of the Practical Planner Podcast. I'm your host, Thomas Kobelman. Here with me, Dave Haughton. Dave, excited to chat with you again today. I think we have a topic that is very valuable where, you know, I think it's actually the. Almost the biggest pain point in estate planning. You know, I find that obviously we're the push for people to get their estate planning done, but, you know, there's all the conversations about, you know, what's an estate plan if it never gets funded? And part of funding is also titling. And I don't think it's as easy as people think. You know, I think the average person's like, you get your state plan done, everything's done, right. It's just go through it great. And it's like, that's maybe half the work, maybe depending on how many accounts you have. And so I'm excited today to chat a little bit about titling and how to manage all of the different accounts. I think the best way to have this conversation is kind of group different accounts and go from there, probably starting with bank accounts because. And I think with this conversation, we're specifically talking about that you set up a trust, Right. Because if you just set up a will, this is pretty simple, right? Beneficiary designations have to be correct. You're almost everything is going to go through probate. There's still going to be TOD pods, some of that type of stuff, but in general, a decent amount of your stuff is going to go through probate. So we're assuming here we've set up a trust, and now we need to figure out how do we get everything titled correctly. So starting with bank accounts, what do you typically find is kind of the best setup?

[Dave Haughton]

Yeah, I mean, you know, when we're talking about an estate plan, I'm usually thinking about they have a revocable trust.

[Thomas Kobelman]

Yeah.

[Dave Haughton]

Because I think most, most clients need a revocable trust. And, you know, I think the way that it works, a lot of times if a client goes to see an attorney, they get their trust in place. Attorney says, there you go, it's all set. You've got this nice binder. And they say, oh, by the way, don't forget to put all your assets into the trust. And then they, they forget by the time they reach the parking lot, right. And nothing ever gets in. So it's a really critical issue. And when it comes to accounts, really, you need to work with your financial professional. Usually it's going, you know, you need your advisor. Certainly if you have investment accounts, IRAs, you need to incorporate there. When it comes to bank accounts, you usually need to go to the bank. And so there's so many things to think about. But the way that you usually want to approach it is any non qualified assets in accounts you want to be in the name of the trust that way, not, not just tod. Because a lot of people think let's just do transfer on death to the trust. What's the difference? The reason is, well, what if you become incapacitated? It's much easier to access trust assets as a successor trustee versus as a power of attorney. Because these banks are really concerned that they're going to get sued. There's so much elder abuse going on. Accepting a power of attorney is not as easy as having an asset in trust and having the successor trustee take over.

[Thomas Kobelman]

Well, let's talk about that one a little bit more though because I think, you know, maybe 10 years ago the average person had like one bank account, right? They had like their checking account and maybe they're their savings account. They're both at Chase Bank. I see today's world a lot different, right. Potentially we have like a couple individual accounts. Maybe we have a joint checking account. Maybe, you know, you know, something I teach a lot of clients is multiple savings accounts, right? We have our emergency fund, we have our travel fund, we have our tax savings fund, we have our house down payment fund. So we have all of these accounts and I think it is possible that people go in and they change all of them. Is it probable? Maybe not. Right. So I think if we're thinking about the side of, you know, a perfect world is everything's titled in the name of the trust, but maybe in the world of what are clients actually going to get done, do you maybe see this as like a. What's the main account you're operating in plus what's like kind of the big savings account? Let's at least for sure get those in because that's where the most the funds are moving.

[Dave Haughton]

Yeah, I think, I think definitely it's important to start with the bigger accounts just to make sure that those are in and you know that those are going to flow through your estate plan if you're prioritizing. The issue I have is that even if you leave a small account out that's still going to have to potentially go through probate if it's still in your name, it doesn't have a beneficiary designation, it's not in the trust. And so There are thresholds in each state, as far as I believe Massachusetts, 25,000. Some states are high. California, I think, is a lot higher.

[Thomas Kobelman]

50 or 100 or something.

[Dave Haughton]

Yeah. And so, you know, when it's like a small checking account or something like that, it's less worrisome because there may be a really easy process to go through probate with that. And sometimes you even want to leave a small checking account out just to make things easier. But, yeah, really important that you realize that, yes, you probably want to start with the bigger assets because you want to make sure that it flows the way that you want. But if you leave too much out, you could cause a full blown probate, which is what you're trying to avoid in the first place. So you want to be really cognizant that any assets that are in excess of whatever your state threshold is for that small estate affidavit, if your state has one, you want to make sure that you get those into the trust. Because one of the key reasons to create a trust is to avoid probate. And if you leave one asset out and it causes a full blown probate, you've kind of undercut the whole purpose for what you're doing.

[Thomas Kobelman]

Yeah, that makes sense. I think, you know, at the end of the day, let's, let's talk about it in a perfect world anyways, because our goal as advisors is to push our clients to do everything right. And there's obviously a lot of value in that. I don't think you have to say, hey, you got your trust set up. You know, it's April 9th by May 1st, I want every single thing in the name of the trust. Right. Like what I found is, you know, eventually we get to estate planning. Okay. We go through it. What needs to get done. Great. We're going to get it notarized. Great, that's done. We're going to get to the house. Great. Then, you know, and the business, because that's going to be part of it. We'll talk about that as we go. Okay, great. Then let's do investment accounts. Okay. Then let's do savings accounts. Then let's update beneficiary designations. Like it's okay if it takes them a year to get this done. It doesn't need to be done in three weeks.

[Dave Haughton]

Yeah. And I think what's important is typically if you're doing a trust based plan, you're going to have what's called a pore over will, which makes sure that everything gets into the trust through the probate. Process if necessary. You don't necessarily want the probate process, but a lot of times, once a client fully executes and signs their estate plan, everything's going to eventually flow the way that they want. Maybe not in the most efficient manner possible. If they were to an accident were to happen the next week and they weren't able to get everything into the trust yet, so there's obviously that risk. The more time that goes by. You didn't get stuff into the trust.

[Thomas Kobelman]

We tell. You got to tell them that. Right. You're like, hey, we realize this might take you longer. The risk if you do this now is this. Totally understand that if that's. You're okay with. Here's why, here's how it's chunking away.

[Dave Haughton]

Right, Right. But every. Everything's going to end up, it should end up the way you want it. It's just the more work you do on the front end, the more peace of mind you'll have, obviously, and the less possible administration and expense that's going to happen. But as far as, like how it's going to distribute out and flow and who's going to be in charge, who's the trustee, who's the executor, those things will be in place. So your estate should flow the way that you want. It's just the avoiding probate aspect or some of the administrative burdens might be heightened if you don't get assets into the trust and something happens before that time.

[Thomas Kobelman]

Yeah, that makes sense. So bank accounts wise, you know, F level is in your individual name. Maybe, you know, trust is beneficiary, you know, next better but not great option is tods and pods. Like you're at least one step better. You know, gold standard is let's get everything retitled in the name of the trust to make sure, you know, we avoid probate. Everything flows through incapacitation is covered because you know, things aren't going to get denied in that same structure.

[Dave Haughton]

Yeah, no, I think that's exactly right. But I do think that it's not one size fits all. That's why it's really important just to look at each, each individual asset and make sure that you're coordinate with your advisor, your attorney, whatever the case is, to make sure that you're not just taking the advice that we got to get everything into the trust. So just like, you know, just bowl through it and get everything in. Because there could be things like, like, you know, I'm sure we'll talk about IRAs, those you don't retitle into the trust during your lifetime. You can't. You'd have to cash it out and realize all the taxes on them. So that might be something you may potentially name the trust as beneficiary. Something like a non qualified annuity. Something that you oftentimes don't want to put in the name of the trust. Oftentimes you don't even want to name the trust as a beneficiary because you could cause a rapid payout to have to happen. So I think it is really critical to look at it by asset by asset and not just take like a, a wholesale approach. We need to get everything into the trust or not because there are some mine fields hidden in those assets that you might not realize.

[Thomas Kobelman]

Yeah, I mean, let's go deeper, let's keep going account by account. So we don't have to go like, you know, IRA versus New maybe. I mean, go in there. But let's go into your qualified accounts. So we have your Roth accounts, you know, we have your traditional accounts, etc. How do we do it there? Right. Because you're not. Those are individual accounts. You're not able to title them in the name of the trust. You know, what I've found most valuable is typically because these pass without probate. Right. The main beneficiary is the other spouse. Right. That seems easy. That's going to go the way you want. But then what about after that?

[Dave Haughton]

Yeah, I would agree. Yeah. So first things first. The spouse usually carries with it really unique benefits under the tax law to be the direct primary beneficiary. So you can name the spouse as the primary beneficiary. Obviously that might not be the case in some circumstances. Let's say it's a blended marriage or a second marriage or you have control concerns. There could be times that you're going to name the trust as beneficiary while the spouse is still living. It's going to be rare though, because you're going to be giving up some positive tax attributes. But after that it's really going to be a question of control versus administrative convenience. Because a lot of times you can name the trust as beneficiary and the underlying beneficiary, children or whoever the beneficiaries are, are still going to basically retain the distribution period that they would if they had received it individually. If the trust is drafted appropriately and whoever's creating the trust created it appropriately. But if the kids receive those assets directly, everything's obviously easier. It means that it's in their name. It's under their tax ID number. They can decide, you know how to take the assets out, you know when to realize the taxes they're in full control. But if you don't necessarily trust them to do that, let's say they're minors or they have substance abuse issues or you just think they're not mature enough.

[Thomas Kobelman]

As I was to say that's like one of the most common one client conversations having today is he's like we're, well, we're way wealthier than I thought know we were a couple years ago. Now we're pretty wealthy. Like I just can't see my kids having the responsibility of getting this type of money before 30. Right. Like control is a big one.

[Dave Haughton]

Right? Yeah. And that's a scenario where as long as the trust is drafted correctly you should be able to still retain that 10 year period. It's just the trustee is now going to be in a more administrative burden of determining all right, how much do I give each year and then when I take those, those distributions out it's going to be taxable to the trust. Then I'm at the turnaround and K1 the beneficiary. So in the end you can usually reach it. So it's the same end tax liability results but there's going to be more administration involved. And so that's why it's just important to weigh control over you know, tax efficiency or administration. You know what's more important to you? Because I think you can get the best of both worlds to a certain extent as far as you can retain control of it for that 10 year period once it reaches that 10th year when it's in the trust now the trustee is going to be in a really tight spot to be like all right, do I distribute this all out or to the beneficiary and pass the taxes along the beneficiary or do I keep it in the trust and do I realize all of those taxes at the trust and estates rates which is very unfavorable. So a lot of decisions to be made. That's why it's really important to coordinate this with your advisor, your financial professional, cpa, whatever the case is just to make sure that you're making the right decision when it comes to that but situation.

[Thomas Kobelman]

Right. You're giving up a lot of the tax planning side. Right. If it's, you know, I have some clients who have inherited pre tax accounts and they have, you know, a few years left to get it out. Well we can funnel a lot of money into other pre Tax accounts while they're working. Right. You can kind of offset this. We, when it's inside the trust, you do lose some of those benefits, right?

[Dave Haughton]

Yeah, absolutely. Yeah. When it's inside the trust, it just adds a lot of, a lot of complexity.

[Thomas Kobelman]

Right. I mean they're not necessarily higher. You just hit higher points quicker.

[Dave Haughton]

You hit higher points quicker. There are usually ways around it. So long as the trustee has the ability to K1 the beneficiary and pass it out before the end of the tax year. But again, that's administration, that's extra tax forms. And if you don't need to do it, then you probably don't want to set it up that way.

[Thomas Kobelman]

Yeah, yeah, good points. Okay. Anything else there? Should we go to non qualified accounts?

[Dave Haughton]

Yeah, no, happy to move on.

[Thomas Kobelman]

So let's go to non qualified, you know, regular taxable account.

[Dave Haughton]

Yeah, I think in, in most circumstances it just makes sense to, to, to move that over into the name accounts.

[Thomas Kobelman]

Right. Same thing as a bank account, except for you. Even more reason to title into the name of the trust because you're probably, you know, maybe, I guess some people don't have a lot of money in there. But typically, you know, for wealthy people, that's going to be your biggest account over time. So you want to make sure that that's obviously avoiding probate.

[Dave Haughton]

Avoiding probate. And if something happens during your lifetime and you become incapacitated, having it flow through the trust versus having to use a power of attorney. Because these custodians do not like powers of attorney a lot of times, and especially if you need to show that the person has become incapacitated, whatever the case is, custodians can be tough with powers of attorney when you present them to them and getting them accepted. So what I found is that the process for transferring to a successor trustee is far easier than with a power of attorney. And that's the big benefit during lifetime why you'd want to change the ownership to the trust versus just doing a tod.

[Thomas Kobelman]

Yeah, yeah. And I think those are all like, I mean, super important points. I think sometimes people get caught up and they're like, oh my gosh, how hard is this going to be to do, Do I need new accounts, et cetera? Like typically it's, here's the certificate of the trust proving that we have it and they just kind of retitle into it. Like, you know, my dad just went through estate planning and you know, for me when I went to retitle, I basically just were like, hey, here, redo it for them, they had to go into the bank. So like, worst case, you have to go into a bank or go into a, you know, an office for a custodian and do it. But it's really not some hard thing to do.

[Dave Haughton]

No, it shouldn't be. I mean, it certainly depends, financial institution to financial institution, how difficult they make it for you. You know, sometimes it's just a simple transfer document. Sometimes they make you open a new account and close the old account. So it's really going to depend on the custod or the financial institution and administratively, operationally, what they require. But at the end of the day, I mean, there should be hopefully so many customers who have done this that they should have streamlined and make it easy.

[Thomas Kobelman]

Yeah, I was gonna say I haven't come across and can't even think of the last time I came across a place where they made you get a new account. So I think it's. We're also just in a world where trust, the access are, are becoming so much higher that I think they're like, for them, it's more of a nightmare if they have to do more work around it too.

[Dave Haughton]

Right? Absolutely. Yeah.

[Thomas Kobelman]

Okay, cool. So I think the last couple to talk about are, you know, the business you own and private investments and then life insurance.

[Dave Haughton]

Yeah, I think, I think those are really tough decisions because the business you own, I think in the end you want everything to flow through that estate plan. However it starts out, you want it to end up flowing through the estate plan. And how it gets there is where the complexity comes in, why you have to work with your professionals. Because you're looking at a business and you might say, yes, I want my business to own my trust asset or my business to be in my trust. But, you know, what if it's an S corp? What if it's some kind of professional, you know, some kind of profession where the license can only be held by an individual, it can't be held by a trust. What if the business itself has restriction transfers because of whatever agreement you have with the other members? And so you got to be really careful when it comes to a business. Oftentimes most of the times when it comes to a revocable trust, you can transfer that ownership into the trust and it's, it's not a big deal. But these are all the things that you want to look out for. Like I said, in the end, you probably want it to funnel to the beneficiaries the way that you set funnel forth in the trust. Just whether you want to change the ownership during your lifetime to the trust is going to depend on all these different factors of how the business is set up and whether there are any restrictions on transfer.

[Thomas Kobelman]

For people who don't know, can you go a little bit into like the potential downsides of the S Corp?

[Dave Haughton]

Yeah, so the S Corp is a specific type of entity that you can elect under the IRS code and it has specific eligibility requirements. So there can only be so many members of, of that S Corp and only certain people can own it. And when the owner is the trust, you need to make sure that that trust fulfills all those requirements. And oftentimes when people draft trusts, they make sure that you know, whenever the S Corp interest is going to flow, flow through it, that it's going to be set off and that portion of the trust is going to fulfill all those requirements. But you do still want to be really careful and make sure your attorney, your financial advisor knows that's the asset going, going in and they've looked at the trust and they make sure that it's going to fulfill those requirements. Because you don't want to disqualify your S Corp simply because you put it into a trust, you know, because there could be like really big ramifications to that.

[Thomas Kobelman]

Yeah, makes sense. Okay, cool. Last couple of minutes. What about private investments?

[Dave Haughton]

So yeah, again I think the same, the same concepts apply that you want to be really careful as far as making sure that you're looking at what is this investment and what type of restrictions are associated with it. Because obviously when it comes to private investments to alts, they have all different kinds of subscription information and you know, is, is it a qualified investor? Whatever the case is, a lot of times when it comes to revocable trusts, they don't really see that as anything different than the investor themselves.

[Thomas Kobelman]

Irrevocable. Those are, the issue is like.

[Dave Haughton]

Exactly.

[Thomas Kobelman]

Yeah, they can't do any estate tax planning because they've been told by SpaceX that they already have the max number of people in an irrevocable trust counts as another person, which is, which could have to push them into an ipo. And so you can't do that.

[Dave Haughton]

Exactly. Yeah. These are the things to look at. That's why you know, when it comes to things like bank accounts, non qualified accounts, homes, certainly to redeed, retitle the home into the trust, those things are a little bit more straightforward. When it comes to, when you have some of these more unique assets like alternative investments, businesses, you want to really look into the details and not Just be flexible, flippant about it and be like, oh, just change, change the title because it could have severe ramifications.

[Thomas Kobelman]

Yeah, yeah, that makes sense to me. Okay, cool. And then last one. Life insurance.

[Dave Haughton]

Yeah, life insurance is an interesting one because you can change the ownership of a life insurance policy into a trust. And a lot of people do during lifetime. Certainly if it's an irrevocable life insurance trust, you want to. If it's a revocable trust, a lot of people just change the beneficiary. It's going to depend on what type of life insurance you have. Right. Certainly if it's a term policy, not a big deal. Just to name the beneficiary of the trust. The beneficiary of the policy, the trust, because you know the assets are going to flow into it. There's not a whole lot that can be done during lifetime with that policy. Something that has a lot of cash value built up. Certainly that might be something you might more think about getting into the trust during lifetime because you, like we talked about with the power of attorney issue, you want to make sure the person after you has easy access to those funds. So a lot of times it's six one way, half dozen the other as far as changing ownership or the beneficiary. So it's something again to talk with your advisor about.

[Thomas Kobelman]

Yeah, really good points. Okay, well, I think this episode was super valuable. I know, like for my clients, even, you know, advisors I talk to, like, this is one of the biggest questions they have. And I think we were able to dive into some of the ones that like, here's probably what you should do. And there's other ones that are going to be state by state, different, you know, businesses are going to make it different, etc. So I mean, obviously always work with the estate planning attorneys, you know, for these types of questions. But hopefully this helps. You know, I think as the advisor, you're one of your biggest roles is how do I help after the estate documents are drafted? Right. One is reviewing, but two is making sure everything gets funded because typically. Right. You like stapling attorney draft done, Right. They to the house, which we didn't talk about. Right. You want your house to be put into the trust, etc. But our job is to help make sure everything gets funded because we're working with them on a yearly basis.

[Dave Haughton]

Absolutely.

[Thomas Kobelman]

So everybody, hopefully that you found this episode valuable. If you did, please, you know, go rate, give us five stars, leave a review, and again, if you have any questions, send them our way. We'd love to help answer them. We'll see you back in a couple weeks, Sam.