Will Your Assets Really Go to Your Heirs?

Other types of accounts can also cause problems if they aren’t titled properly. “It’s not just for IRAs,” says Mark Bass, a certified financial planner (CFP) based in Lubbock, Texas. Most financial accounts can be titled so that the money passes directly to the beneficiary, which saves probate costs. But you have to make sure your beneficiaries are up to date. Here are three ways you can title an account.

• Payable on death. This type of account is owned by one person, who manages it and designates who gets it when he or she dies. The proceeds bypass probate and go directly to the person designated as the beneficiary. Typically, the beneficiary only needs to present a death certificate and identification to take possession of the account.
• Joint account with rights of survivorship. This means that the account is co-owned with another person. Each person can take money out or put money in. When one owner dies, the money goes directly to the surviving owner.
• Joint tenants in common. In this type of account, both people have access to the account — but only a designated portion. In this case, the deceased’s portion of the account passes into their estate, which is controlled by a will.

You should also have beneficiaries for your 401(k) plans and other workplace retirement plans. The spouse is automatically the beneficiary and has to sign a notarized waiver if he or she doesn’t want the money. But you should name who gets the money if your spouse predeceases you.

Most states will let you name anyone as a the beneficiary of an IRA, however. You may not need a waiver to designate someone else as a beneficiary.

When stronger measures are needed

Sometimes a person with a will and properly titled accounts is still unable to ensure that their money goes where intended. This is not uncommon. Suppose, for example, you and your spouse arrange that the spouse gets the money when you pass, and that the remainder of the estate goes to your two children.

You pass away and your spouse gets the money, as you intended. But if he or she marries again, that money could pass into the new spouse’s hands and, potentially, go to their children rather than yours. “We see that quite a bit,” says Bass. “The surviving spouse thought the marriage was for love, but it was for money.”

One solution is a prenuptial agreement that would put your assets into a trust for your spouse’s benefit. “They can take income from the trust and have the assets protected from creditors,” Bass says. When the spouse passes away, the money will go to the trust’s beneficiaries.