“Titling” boils down to current and future ownership: An account with only your name on it means you own the account. Adding other individuals to the title determines who else has access to your accounts while you are alive, and what happens to those assets when you pass away. Titling your assets correctly can have a huge impact on taxes, transfer costs, and legal fees when unfortunate events happen to you.
Owning an account jointly allows multiple parties to have full access to assets in the account. One critical caveat, which has led to a shocking number of legal disputes, is whether the account is created as Joint Tenants With Rights of Survivorship, or merely a “Convenience Account.” The former passes to the surviving account owner(s) outside of probate at the death of the first named owner. The latter is strictly for when one owner wants another person to have access to funds to pay bills. Convenience Accounts are not true joint accounts because they do not pass to the other owner at death, leading to either a future probate of the account, or the surviving owner absconding with the funds because he feels he deserve them Either outcome leads to avoidable legal fees.
Correct titling of trust assets is equally crucial: The title of a bank account / brokerage account / deed to real estate should be “The (Your Name) Revocable Trust”. Merely referring to an account in your trust document that is titled in your name is usually not effective, meaning that the trust does not own the property, your Trustee cannot access the account, and the funds shall be administered through Probate upon your passing. If an estate attorney offers to draft you a trust and does not mention asset re-titling you can politely thank him for his time (optional) then get up and leave (highly suggested).
Ownership of life insurance policies is an area that is also fraught with pitfalls: People believe they have the opportunity to make an erudite decision when given ownership of another person’s policy. However, if the title-holder dies before the insured individual dies, part of the policy’s value may be included in the owner’s estate for estate tax purposes. Even worse, forgetting to name a trust as owner (and beneficiary) of an Irrevocable Life Insurance Trust practically guarantees the entire amount will be included in the insured-owner’s estate for estate tax purposes.
Lastly, forgetting to title an account as “Transfer On Death” or “In Trust For” guarantees the account will pass through Probate upon your passing. Remember that both accounts are in your sole control during life, and ownership only vests in the TOD beneficiary at the death of the owner.
Having assets is the starting point, but correct ownership of the accounts is the end game. Do yourself and your estate a favor and ensure you title them correctly.