Do you believe that you don’t have enough money or a large enough estate to warrant an estate plan? Despite recent federal tax law changes and credits that allow up to $11,200,000 to pass free of federal estate tax, there are other considerations that apply to everyone, regardless of worth. If you already know how you’d like your estate handled after you pass away, then congratulations! You’re ahead of most people.

Advance planning will help you understand how your assets will be transferred and will help ensure your wishes are carried out. It may also assist your beneficiaries and heirs in avoiding unnecessary delays.


Understanding What Assets Constitute Your Estate

Generally speaking, your estate includes those assets in which you have an interest in at death. For example, your estate may include:

  • Real estate
  • Personal property (e.g., clothing, furniture, jewelry, and/or collectables)
  • Financial accounts (e.g., bank and/or brokerage accounts)
  • Life insurance
  • Annuity contracts
  • Pension benefits
  • Retirement plans (e.g., 401(k)s, 403(b)s, and IRAs)
  • Business interests

Considering the Options Available to Transfer Your Estate

When creating your estate plan, you will want to determine how you want the assets in your estate to pass to others. It is helpful to keep in mind that assets are generally transferred in the following ways:

  • Form of Ownership. Assets held in certain forms of joint ownership may go to the surviving joint owner(s).
  • Beneficiary Designation. Assets pass to the people or entities designated as beneficiaries on certain contracts or accounts, such as life insurance policies, annuity contracts, retirement plans (such as 401(k)s, 403(b)s, and IRAs), and Transfer on Death accounts.
  • Trust. Assets held in a trust transfer according to the terms of the trust.
  • Will. Assets transfer according to the terms of the will.  These assets are commonly and collectively referred to as the “probate estate.”
  • Descent and Distribution Rules.  Assets for which transfer has not been provided through the four previously-cited means will default to transfer under the intestacy laws of the jurisdiction in which you were a legal resident at the time of your death.

Understanding What “Probate” Means

By way of background, the term “probate” is generally used to reference:

  • The legal process by which your will is determined to be your final statement on the disposition of your probate assets and the individual(s) chosen by you to serve as executor(s) are appointed to manage the probate process. (Note:  Your executors may also be responsible for disposition of any assets that must be transferred according to Descent and Distribution Rules.)
  • The legal process by which your probate estate is administered.  This involves gathering of your probate assets; paying your outstanding debts, taxes, and administration expenses; and distributing your probate assets in accordance with the direction of your will.

The probate estate does not include assets held in a revocable or irrevocable trust, joint accounts with rights of survivorship provisions (not all forms of joint ownership contain this provision), and/or assets with designated beneficiaries.  These assets will be transferred according to their specified provisions.

Your goal is generally to minimize what assets are disposed through your probate estate, as this may trigger additional estate expenses and/or exposure to creditor claims. It may also limit options regarding the distribution or transfer of retirement plan assets.  The probate process can at times be lengthy, oftentimes due to resolving complications due to a lack of clarity and/or completeness regarding the disposition of assets, and/or having to work through the court system.

Knowing Why It’s Important to Designate Beneficiaries

Whenever possible, it is important to name beneficiaries. Designating beneficiaries will generally provide for a direct, more expeditious, and less encumbered transfer of the asset to your intended beneficiary.  In the event that you may need to change a beneficiary, that process may also be more straightforward than revising your will.  It is important to note that for certain contractual assets (e.g., life insurance, IRAs), failure to designate a beneficiary may result in your asset being transferred to a default beneficiary as stipulated in that contract.  That default beneficiary may not be the person to whom you would like the asset to transfer.  Should there be no provision for a default beneficiary in the contract, the asset generally would then be transferred through your estate.

Understanding More Legalese:  Per Stirpes versus Per Capita

There are a few other legal phrases, per stirpes and per capita, that are commonly used throughout the estate planning process. These phrases refer to the two ways you can leave an asset and/or your estate to your beneficiaries.

  • Per stirpes means that if one of your beneficiaries should pre-decease you, the portion left to him or her would be transferred equally to the deceased beneficiary’s descendants.
  • Per capita means that if one of your beneficiaries should pre-decease you, the portion left to him or her would be transferred equally among your other named beneficiaries.

Here’s a simple example to demonstrate this concept:

You have an asset for which you have designated your three children as beneficiaries and among whom the asset is to be distributed equally.  Each of your children, in turn, has two children.

The questions you would ask yourself are:

If one of my three children dies before I do…

  • Do I want the portion designated to pass to my deceased child to now be distributed equally between my two surviving children (per capita)?
  • Do I want the portion designated to pass to my deceased child to now be distributed equally between my deceased child’s children (per stirpes)?


Not sure how to establish an estate plan?  Here are steps you should take:

Establish an Estate Plan

  • Create an inventory of all your assets, and identify the means through which they are currently identified to transfer (i.e., form of ownership, beneficiary designation, will, trust).
  • Make a list of the individuals you would like to benefit from the assets in your estate.  Ensure that you place your beneficiaries in the appropriate priority position (primary vs. contingent and per stirpes vs. per capita) so that assets transfer to your beneficiaries in the manner you desire.
  • Work with an estate planning attorney to:
    • Review your asset inventory and evaluate whether the current transfer method associated with each asset is the appropriate option.
    • Create your will and designate the executor(s) (if already in place, ensure that it is current).
    • Evaluate whether trusts make economic sense for you.
    • Review any other tax stipulations and opportunities.

Implement Your Plan

  • Organize important documents and records necessary and/or helpful to transfer your assets.  Ensure that they are maintained in a secure place, and that those who will need them at the appropriate time are aware of where they are located and how to access them.
  • Review each of your assets to ensure that they are set up to be transferred to the intended recipient in the manner that you would like.  Contact those entities (such as banks or brokerages, etc.) that you need to work with in order to make any changes.
  • Double-check beneficiaries to make sure that they have been designated properly and in the manner you wish (i.e., primary vs. contingent and per stirpes vs. per capita).
  • Ensure that documents required to be filed with a governmental authority have been duly tended to (Some jurisdictions require this).
  • Talk to your Atlas Wealth Management Advisor to ensure that the beneficiaries on your accounts managed by Atlas are up to date and reflect your current wishes.

Review Your Plan

It’s important to review your estate plan every three to five years, as well as when significant changes occur that may affect the transfer of assets.  Significant changes may include life changes such as marriage, divorce, the birth or death of a loved one, and/or a change in financial condition.  Changes in federal and/or other jurisdictional tax laws may also have an impact on your existing estate plan.

Making sure that the right people get the right assets at the right time is the essence of estate planning. Contact your Atlas Wealth Management Advisor if you’d like to develop or review your estate planning strategy.

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