Spring Cleaning Tips--For Your Estate Documents (by Michelle Kuehner)

Tina Haapala |

If you’re anything like me, spring cleaning is a welcome annual occurrence. Getting everything cleaned and organized gives me a sense of refresh and order. However, others may see this as more of a necessary evil. Regardless of your outlook on such tasks, when it comes to your estate documents, neglecting your annual financial “cleaning” could harm you more than a few dust bunnies.

Once someone has a will, general power or attorney, or medical power of attorney completed, the paperwork is typically hidden away in a file, never to see the light of day until a dreadful event happens. For most people, if you’ve taken the time to complete this paperwork at all you are ahead of the game. However, there are many more things to look into other than those few documents.

As a recent widow, I received firsthand experience of the many, many things that can be inadvertently overlooked. Not only can these things be troublesome to correct, but they can also become quite costly. Here are a few things to consider:

1)      Bank account titling: This one can trip up a lot of people, especially if you have had an account for a long time. In the past, there were various ways to title an account, even if the account had joint ownership. Understanding what each one means can help you to determine which is best for your situation.

a.       Joint with Rights of Survivorship: If one owner dies, the other owner receives all of the funds in the account. This is the most common type of joint account, simply because it doesn’t require probate.

b.      Joint with Tenants in Common: Tenants in Common means that both parties have full and unrestricted access to the contents of the account. However, once one owner dies, the other owner is only entitled to their half. The other half of the assets revert to the estate of the deceased. Probate may be required to free up those funds. In a husband and wife situation, it’s best to opt for the joint with rights of survivorship account.

c.       Payable on Death account: one person solely owns the funds in the account, and another person (beneficiary) will own the funds after the first person's death. This is for a taxable type of account, not retirement accounts.

2)      Beneficiaries on your IRA, 401k, and other retirement type accounts:It’s more common than not to leave your spouse as the beneficiary on your retirement accounts. If you are employed, your HR department will probably be one of the first to know your situation has changed upon a spouse’s death and begin preparing the paperwork to update your file. Now, while your employer knows of this change pretty quick, we typically don’t hear about it until you call us. Make a note in your estate documents file to add us to the “to-do” list.

3)      Beneficiary on life insurance: Again, an often overlooked call. While having your beneficiary updated on all paperwork is quite important, if you have listed a contingent beneficiary on your documents, you can buy yourself some time.

4)      Vehicle registration, car insurance and ownership change: This is one that really tripped me up! While most couples have their vehicle in both names, and may even have the right of survivorship listed on the title, there are still some things you need to know. To renew the registration, both names listed on the title must be on the proof of insurance. Take a look at your car insurance policy; is it set up this way? Also, make sure that in addition to both names being listed on the title, you also have a right of survivorship listed. If you don’t, download the form, sign it, and keep in your files. For Texas this is Form VTR-122, and does not need to be filed prior to death (well, that’s the current rule). Just file it away with your other important documents.

Hope this helps you establish your own checklist of things to look into each year. As always, for any estate questions for your particular situation, we recommend you seek the advice of an estate attorney or professional. And you can call us for recommendations, or for other questions you may have.