Forgetting the Small Stuff Can Create Big Headaches in Estate Planning

Often, it’s the little things that cause the biggest problems, and that’s true in estate planning as well. Not taking care of minor details can add up to big headaches for your survivors, and even cost them big dollars in court fees and taxes.

Below are a few of the most commonly overlooked – yet relatively easy to address – estate planning items.

Cars and other titled assets:

With many smaller estates, the only assets that are passed on to beneficiaries are automobiles and, to a lesser extent, boats. Cars and boats are separately registered and titled with your state, as are boat trailers and outboard motors. But people often forget about them when crafting their will – resulting in these assets going through probate court and incurring unnecessary, additional expense.

In Ohio, a surviving spouse can assume ownership of one car outside of probate, and additional titled vehicles of up to $65,000 total value. But rather than worry about whether certain titled assets will pass smoothly and without a probate court’s oversight, you can fill out an “Affidavit to Designate a Beneficiary (form BMV 3811),” which you can find on the Ohio Bureau of Motor Vehicles website, and have it notarized at your local bank branch. Then, take the affidavit and the car or boat title to your local title office, show your ID, and ask that the asset be made transferable upon your death to a specified individual. It’s easy – well, except for having to wait in line at the title office. Just make sure you call ahead for an appointment time.

Financial accounts:

Any assets like bank accounts and brokerage accounts should have a “pay on death” beneficiary listed on the account. Typically, the spouse is named as the primary beneficiary, but if you have established a trust, it should be listed as the second “pay on death” beneficiary in the event there is not a surviving spouse.

Family heirlooms:

In Ohio, courts don’t care so much about tangible personal property like heirlooms, except when title documents are involved. Courts typically only care when something is sold and money needs to be added to the estate, or if family members are fighting over an heirloom. This sometimes happens with unusual and possibly expensive items, such as rare pieces of art, baseball trading cards and antiques. The easiest way to handle these assets is, when executing a trust, have your attorney draft a one-page document declaring that all of your personal property is assigned to your trust. Put it in writing and the court doesn’t have to get involved.

Digital assets:

In wills and trusts, it’s best to specify in writing that the executor and trustee should have full power and the ability to access any digital assets left behind. That means providing login credentials, including passwords, in a separate document from the will and trust so those digital assets can be tracked down and claimed.

IRAs:

If you will be passing your IRAs on to a beneficiary, make sure your financial planner knows about the account(s), that you have named a beneficiary, and that someone explains to the beneficiary the rules of these “inheritable IRAs.” Because these IRAs are considered taxable income when inherited, beneficiaries may want to consider drawing down from these accounts over 10 years (the maximum amount of time) so as to limit the amount of taxable income. If the beneficiary takes it all at once in a lump sum, all of that additional income will likely push them into a higher tax bracket.

Real estate owned in other states/countries:

Make sure your attorney or financial planner is aware of them. Not doing so can create a big mess in probate court, and unless your attorney is licensed in multiple states, may even involve hiring another law firm in that state!

Taking these small steps when planning your estate can save your beneficiaries big amounts of time, money and worry.