Ep. 6: Why Asset Alignment Is So Important to Your Estate Plan
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In this episode of Repair the Roof, Attorney Ted Gudorf discusses why asset alignment, or funding, is key to having an effective estate plan.
Asset alignment revolves around making sure that the assets you own are properly titled, whether in the name of your revocable trust, your irrevocable trust, your limited liability company (LLC), or your individual name with a designated beneficiary.
Before diving into asset alignment, it is important to first identify the assets you own and in whose name each is titled—often overlooked details. Once this is done, prepare the necessary paperwork needed to retitle the assets to the proper name.
Some of the primary benefits of properly funding your estate plan include avoiding both living and death probate, protecting your assets (for example: from lawsuits, nursing home costs, etc.), and ensuring that your assets get passed onto your grandchildren.
90% of the estate plans we see are not fully funded and, in fact, most are not even partially funded. At our law firm, we believe in fully funding your revocable trust.
- Identify the assets you own and how they are currently titled (1:26)
- Having a client organizer, collecting the paperwork, and creating an asset spreadsheet (3:22)
- Retitling the assets to be in the proper name (5:18)
- Avoiding both living and death probate (6:48)
- Protecting your assets (9:00)
- Ensuring your assets get passed onto your grandchildren (9:58)
- Fully funding your revocable trust (12:08)
- Retitling real estate (15:17)
- Retitling tangible personal property and banks, life insurance, and unique assets (18:05)
- A recap of today’s episode (20:49)
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Transcript: Prefer to Read — Click to Open
Hello everyone, my name is Attorney Ted Gudorf. Welcome to the repair the roof podcast. This name comes from President Kennedy’s famous quote, the time to repair the roof is when the sun is shining. In this show, we help individuals and families learn more about all things estate planning and elder law.
Welcome to today’s show. This is Episode Six. We are broadcasting this show from our recording studio in Clayton, Ohio. Today’s topic is why asset alignment is so important to your estate plan.
A colleague of mine once described asset alignment or funding as being the key to having an effective estate plan. What is this called acid alignment, it is making sure that the assets you own are properly titled, whether it be titled in the name of your revocable trust, your irrevocable trust your limited liability company, or in your individual name with a designated beneficiary.
Today, we’re going to spend a little bit of time and drill down on this really important issue.
Now, before we do our asset alignment, work, our funding work our retitling work, the single most important thing we have to be able to do is to simply identify the assets that we own, and how they’re currently titled. You know, for many of us, we don’t give much thought as to how we title assets that we own in our own name, or are in our joint name, with, say, a spouse or a child. I have recently had a client come in and he had assets, a lot of assets. And they were all titled differently, probably six different ways. In some cases, the assets were titled in his individual name. In other cases, they were in his joint name with his spouse, and other cases joint name with a child. In some instances, the asset was owned by a trust. In other instances, it was owned by a limited liability company. In other instances, it was titled differently. For instance, it can be titled either as jointly with rights of survivorship, it can be titled as tenants in common. All of these different legal ways to title property. And my experience is that the average person does not understand the significance the importance of making sure that we have properly aligned your assets. That is what you own with your overall estate plan that we’ve devised for you. This is particularly true once we create a trust based estate plan. So how do we identify what you own? Well, the single most important thing we ask our clients to do to start off with is to create a client organizer, which is some attempt for you to give us an idea of what it is that you own.
Probably the more important thing though, is after we do the Klan organizer, what we want to do is collect the paperwork, that titles if you will, the paperwork that shows how everything you own is currently titled. So, what does that mean? Well, on your real estate, we want to see your deeds. On your bank accounts. We want to see your statement on your annuities, we want to see maybe the initial issuing document. Same is true with your life insurance, perhaps you have an annual statement,
your IRA, again, maybe we have a brokerage statement, your timeshare should have perhaps a certificate, your car titles.
Think about all the things that you own that have a title. It could be anything from a car to a boat, to an airplane to a jet ski or all of the above. So what we recommend you do is first and foremost, provide the client organizer to our firm then provide all of the paperwork showing how the assets are titled, and then work with us to create what we call an asset spreadsheet. And the assets spreadsheet should simply list all of the titled items that you have and how they’re currently owned, and whose name are they? And then create a column that indicates who do we want to own it. So the purpose of asset alignment is figuring out what you own. Two, how is it currently titled, and then three, preparing the necessary paperwork to retitle the assets to be in the proper name. If what you own is not properly titled, then your estate plan is not going to work. So this is really the key to making sure that your plan functions as it is supposed to. We need to take whatever steps are necessary to initially get all of the assets properly titled, and then our goal is for the rest of your life. That we simply maintain this titling approach. That is that as you open up new bank accounts or new brokerage accounts are buying new cars or new real estate, once again, that we make sure that the asset is properly aligned with your estate plan.
And what we mean by asset alignment is that we really take the steps necessary to make sure we understand where that asset is supposed to go. So bottom line is this. If we engage in asset alignment, and put everything where it is supposed to go, we’re going to receive some substantial benefits from that. What are some of the more common benefits we get by funding of our estate plan and doing it properly? Well, it goes without saying that. First and foremost, what we’re trying to do is we’re trying to avoid probate, both living probate and death probate, you see, an asset that is in your name alone will necessarily have to go through the probate process.
When you die, an asset that is jointly owned, will likely go through the probate process, when the second one to you dies.
A lot of people don’t realize that tiling an asset jointly with right of survivorship will likely go through probate. And if a living probate is required, then the jointly owned asset will be subjected to that guardianship action anyway. So, what are we trying to accomplish? Number one, very simply put,
if we want our estate plan to avoid probate, why do we care about probate? Well, again, as I’ve mentioned in an earlier podcasts, probate is public. It’s of public record. Here in Ohio, it will typically take two years to get through the probate process. And then number three, it adds cost and delay to the proper administration of our plant. Typical probate here in Ohio, presently is let’s just call it two years, we can significantly reduce the time involved, the cost involved, and do it in a way where everything remains totally private, outside the public purview. It’s not put on the probate court website. It’s held confidential between your family members who are in charge of your estate. So properly aligning the assets during your lifetime will enable us to avoid living probate and death probate.
Now, there’s other benefits as well. Most of our clients, also as a part of their estate plan, do it to protect their assets. Perhaps it’s protecting it from a lawsuit. Perhaps it’s protecting him from a nursing home. Well, the only way those protections will kick in for you during your lifetime, is if after you create your estate plan, what you own is retitle or funded or aligned with either your revocable trusts your revocable trust, perhaps your limited liability company, and that necessarily involves retitling. Something has to happen in order to move that asset from your name into a new entity name. And that is what we call asset alignment. That is critically important.
In addition to being able to protect assets during your lifetime. Many of our clients also want to give what they have to their children and grandchildren in a way where it is protected. If the child or grandchild gets divorced or gets sued, or goes bankrupt or has a medical disability or worse yet dies, they want to make sure that the assets go to their grandchildren. Now, the only way to make sure that the assets that you own end up going to your children and grandchildren in a protected manner, is to make sure those assets flow through the estate plan that we created for you, and not in some other way. For instance, if you come to us and create an estate plan for the benefit of your children, but in turn, you own assets that are not titled in the name of the trust, or that simply designate your individual children or grandchildren as beneficiaries, those assets may pass to your beneficiary, but they’re not going to pass in a way where it takes advantage of the estate plan that you created, which is to pass it in a way where the assets are protected for the benefit of your children or grandchildren. In other words, oftentimes when we’re setting up an estate plan, we want to make sure that we are funding continuing trust for the benefit of those who come after us. And the only way that those continuing trusts are going to hold assets that you own is if we get them into your trust in the first place.
The easiest way to accomplish that is to retitle what you own during your lifetime into the name of your trust. So what are some of the assets that we retitle? Well, we have a saying here at our law firm that we believe in fully funding your revocable trust. You know, it’s sad for me to report to you that 90% of the estate plans that I see are not fully funded. Most are not even partially funded. They have what we call a bare bones trust based plan, where nobody has taken the time to focus in on funding or asset alignment, we consider funding or asset alignment. To be such a critical part of what we do. We host an asset alignment workshop at least six times per year. I would encourage you if you’ve done estate planning with our firm, I would encourage you to attend the asset alignment workshop and feel free to attend it on multiple occasions. I’m not expecting you to be able to get all of the nitty gritty details on how to fund specific assets in one two-hour workshop. Oftentimes, it will take coming back a second time. In addition to our asset alignment workshop, we passed out to you at your signing meeting our asset alignment workbook, where we have several examples on how we recommend you retitle a particular type of asset, whether it be your car, or your bank account, your brokerage account, your life insurance policy, your real estate, perhaps a note that you own, that somebody owes you some money on that asset alignment workbook, is really beneficial.
The other thing that we are in the process of doing is we have written a book, in coordination with our Florida law firm that we collaborate with. We’ve written a book called asset alignment. And that book will be released in the early part of 2023. Make sure you get a chance to pick up a copy of that book at our office should be available sometime after April 15 of 2023. So make sure you focus in on this issue. Make sure that to the extent that you come across potential problems. You bring it to our attention and we can help you through it. As you buy new assets or open up new accounts. Make sure that you communicate with us to get guidance on exactly how
How to title those. Particularly for those of you who have multiple entities, which is most of our clients, you need to know, does it go in the revocable trust? Is it going to irrevocable? Does it go into limited liability company? How do you want this to be titled, let’s talk about some of the assets in particular, just to give you a little bit of guidance. So when we have real estate, to retitle it, we have to do a new deed. And that does require a lawyer to be involved. Now, for our clients who go through our estate planning process, we insist that we do all of the deeds for you. So that should already be done in the event that you came to us with real estate that you already own.
Now, having said that, to the extent that you are going to purchase new real estate, it should be titled directly in the name of an entity at the time you purchase the property the how to do that right at the closing, oh, by the way, I should mention to you should you need to sell any of the real estate, that you fund it into your trust or your LLC, just let us know. And we’ll help your title company get through that process. Oftentimes, at the time of sale, we’ll have to record what is called a certification of trust. Sometimes it’s an affidavit of trust. Other times it’s a memorandum of trust, for the most part in Ohio, the certification, the affidavit, the memorandum, all serve the same purpose and contain basically the same information. Different title companies have different preferences. But that is a critical part whenever you want to sell a particular piece of real estate.
Now, I also will tell you this, it is critically important that if you are going to refinance any of the property that you have as a part of your estate plan that you communicate with us before you refinance it, particularly for those of you have any a revocable trust. If you have placed real estate in an irrevocable trust, you don’t want to take it back out of that irrevocable trust and put it back into your name, just to refinance it. That will require for those of you who have a Medicaid asset protection trust, a restart the five year look back period, not something you want to do. So be very careful with any kind of refinance on any property that is owned by an irrevocable trust, because there may be some adverse consequences to the refinance. Obviously, with interest rates going higher. Most of our clients will not be refinancing, as they have over the past, say four or five years. But that’s critically important to keep that in mind. So real estate is done by deeds.
Let’s talk a little bit about your personal belongings, your tangible personal property. Again, remember that your tangible personal property is done by assignment. And at the time you did your signing, you may not recall this but you signed a document that assigned all of your tangible personal property over to one or more of your trust, probably your revocable trust more likely than not.
Also with respect to your bank, yes, you can do this by mail. But we highly recommend that you schedule an appointment to meet with your banker to discuss retitling of your checking account, your savings account, your money market and your CDs. All of that should be done for you at no additional cost. If there are problems you encounter, perhaps you have an irrevocable trust and you aren’t exactly sure whether you should or shouldn’t be getting new checks issued that kind of thing. We can help walk you through that. But it is critically important that that happened. That is that all of those bank accounts get properly retitle. Now, just remember, when you go to a bank, if you have other securities with that bank, you’re going to have to see somebody on the security side of the operation. For instance, perhaps you have a brokerage account at one of the banks and you’re going to want to retitle that that will be done separately, oftentimes that will require what is called a medallion signature guarantee. So we do want you to retitle your life insurance, in the name of the trust. We also don’t forget what the trust to be the beneficiary of those life insurance policies. Why? Because we want that death benefit to flow through your trust at the time that you pass away, so that when it goes into the continuing trust
For your beneficiaries, those assets are protected for their benefit. The same holds true of the annuities as well. You may have some unique assets, whether you have gold or silver bars, we can do all of that by assignment. If you own a business, we can typically do that by assignment. But we also, if we have a corporation want to make sure that the change in ownership of the shares is not only done by assignment into the trust, but it has to be changed on the corporate share ledger as well, by whoever holds those documents. It might be a lawyer, it might be the secretary of the corporation, but we got to make sure that the share ledger gets changed as well. So those are just some of the types of assets that we deal with. But again, overall, critically important, our overall goal, avoid the probate process number one, but number two, pass our assets along to our beneficiaries in a way where it is totally protected, particularly for those of you who have continuing trusts. Just remember, asset alignment is really the key to an effective estate plan.
We’ve got a lot of information to share with you. Hopefully you have found that this podcast will give you a little bit of direction. We’ll encourage you not to procrastinate on the funding. We like to see all of this retitling done within the first 90 days after you sign your estate plan. If you have any questions, feel free to reach out. We’ll be more than happy to answer any questions you have. Have a great day. Thank you so much for being with me today.
Until our next session, just remember the time to repair the roof is when the sun is shining. To get started with your estate plan. You can go to Gudorf law.com. Forward slash getting started. For a free copy of our recently published book called The Ohio Estate Planning Guide. Go to Gudorf law.com forward slash book!
It gives me great pleasure to recommend Ted. We worked together for years and I found him to be highly ethical, trustworthy, reliable, brilliant, creative, and a very hard worker, and at the end of the day, a very trusted colleague. It doesn’t… Read More
– Sue Patrick, APR, Senior Partner and Owner Patrick Public Relations Inc. (was with another company when working with Ted at Gudorf Law Group, LLC)