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Seek cohesion within estate planning efforts

When planning for the distribution of one's assets upon death, many New Jersey residents make the mistake of taking a piecemeal approach to the matter. They may draft a will in which they outline how they would like their assets to pass to the designated heirs, which is an important step within estate planning. However, there may be a range of assets that have named beneficiaries, such as bank accounts, investment accounts, life insurance and more. In addition, many individuals name their children or others as joint owners on certain assets, such as their home. This approach can lead to a wide range of problems.

Having a will in place does not change how assets with a named beneficiary will be distributed. Therefore, if the goal is to divide all assets equally between one's children, and one of those children is also named as a beneficiary on one or more accounts, then the end result will be that child receiving one third share of the assets that go through probate, in addition to the full value of the assets held in the separate accounts. This can lead to a high level of contention between siblings, and such matters often end up in court.

Naming an heir as a joint owner can also lead to problems. Consider a scenario in which an adult child is the joint owner of a home that is fully paid off. Should that child go through a divorce, his or her share of the property could become subject to division within the divorce. This can result in the loss of a significant share of the equity in a home that the family worked hard to purchase, leaving fewer assets to distribute to the desired heirs.

In most cases, a better solution is to avoid joint ownership altogether, and to establish a trust in which all appropriate assets can be held. In this way, the trust itself is named as the beneficiary on all banking and investment accounts, and even the family home can be placed within the trust. A trust has the added benefit of avoiding the probate process, which saves time and effort for one's heirs. Funds held in a trust are also protected from divorce, liens and judgments, which is yet another layer of estate planning security for New Jersey families.

Source: The Times Herald, "Do you have an estate plan or just documents?", Matt Wallace, March 14, 2015

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