Often when I talk to potential clients, they tell me that they do not have an estate because it sounds as if only people who are wealthy have an estate. However, that is not true. The definition of estate is all the money and property owned by a person, especially at death. When we start to discuss what property people own, they are surprised to learn what is included in their estate. The first step when meeting with a prospective client is to list all the assets they own and how they are titled. This is the first step during the estate planning process.
What assets are included in your estate? Real estate usually comes to mind first. The title of real estate is determined by looking at the deed, not the deed of trust. The deed of trust is the mortgage and does not always reflect who owns the real property. The deed describes the Grantee or the buyer of the property. If you are married, often you own the property as tenants by the entirety, which is a unique ownership for spouses only. If you own property with another person who is not your spouse, then the real estate will be titled as joint tenants with right of survivorship or tenants in common. If the deed is “silent” and does not specify the words “joint tenants” then the real property is held as tenants in common. This is very important to determine because tenants in common ownership upon death passes according to your Last Will and Testament or through the intestacy statute if you did not write a Will. Next, the contents of the home are included in your estate. People often believe that these items should not be valued; however, the value is included in your estate for estate tax purposes.
Cash accounts such as checking, savings, certificates of deposit, and money market accounts are also included in your estate. Again, we need to look at the title of the asset, whether you own the account in your name alone or jointly with another person. Brokerage accounts, stocks, bonds, and mutual funds need to be valued on the date of your death. Retirement accounts, such as IRAs (Individual Retirement Accounts), 401(k)s, 403(b)s, TSPs (Thrift Savings Plans), and annuities (qualified and non-qualified) are assets that are part of your estate.
Even though clients are under the assumption that life insurance is not taxed, the value of the life insurance policies are included in your estate for estate tax purposes. We need to calculate the value of these policies upon your death. Vehicles, boats, and planes need to be valued and a part of your estate. Often these items are in the name of one person. Determining how these items are titled prior to death is an important aspect of the estate planning process.
Everyone has an estate – be it a large estate as people often envision those who are celebrities to own or a person who simply owns a checking account in their name. Planning as to who should receive the assets included in your estate, when they should receive these assets, and how they receive the assets is important to all clients whether they have a large or a small estate. At Elville and Associates, I work with all clients and the size of their estate does not matter. Everyone needs to have a plan in place for their loved ones, regardless of the size of their estate. However, the reality is the majority of Americans engage in no estate planning at all (including a significant number of celebrities who have passed), despite the important financial and emotional benefits associated with it.
Death and taxes are two certainties in life. Whether you have a modest estate or a large estate, you need to have an estate plan.
Nicole Livingston is a principal and senior estate planning attorney with Elville and Associates, an estate planning, elder law, and special needs planning firm based in Columbia and Annapolis. To learn more about Nicole and her background, please click here. To contact Nicole with questions or to set up a free initial consultation to begin your planning or review outdated documents, please email her at email@example.com, or call her at 443-393-7696.