By: A.J. Cook

Estate laws are so confusing it's difficult to know how to leave something to your heirs.

Basically there are four main ways to pass assets on. Since everyone's situation is different, the method or methods used should be tailor-made.

Joint Ownership. One way to pass some assets on is to put them in joint names with "right of survivorship." This means that when the first joint owner dies, title to the assets passes to the survivor. Bank accounts and homes are often handled this way. For example, if a mother sets up this kind of bank account with her daughter, after the mother dies the account will be owned by her daughter, regardless of what the mother's will says. A problem comes up when a parent uses this type of account so her son or daughter can write checks in case she becomes incapacitated. Suppose the widow has a number of children and wants her daughter to have the authority only to write checks-not to inherit the money. In this case, do not use this designation. Make what you want clear to your banker.

Beneficiary Designation. Another way to pass assets on from the great beyond comes from contractually designating a beneficiary. Examples of this would be life insurance held by an insurance company or a pension plan held by a bank or former employer. You could name as beneficiary your spouse, children, college, church. If you name your own estate, it will be distributed according to your will.

One problem with this is that if you name your young son the beneficiary, when he becomes an adult under state law, like at 18, he could get a hefty amount to spend as he wishes. He could buy a souped- up sports car that would make him look cool around school. The solution is to create a trust to be the beneficiary. The trust would provide that the insurance or pension money would be used only for education and support until your son reaches a certain age, with the remainder then paid to him.

Living Trust. A third method of passing assets on to heirs is to create a living trust. This trust, which can be changed at any time, should be created only by an attorney. Preprinted forms, used without appropriate legal advice, are dangerous. You, a friend, a bank trust department or someone you designate can manage the assets in the trust and distribute them when the trust ends. This trust does not control jointly owned assets with right of survivorship or assets held by a company for you or assets held in your separate name. It controls only assets actually titled in the name of the trust when you take that final journey.

Will. Be sure to make a will. Without it, state law decides how the rest of your assets will be distributed. A will controls assets other than those titled with right of survivorship, held by a company for you ( unless your estate is beneficiary) or held in a living trust. Everyone who plans to die should have a will.

Finally, dying is no simple matter. Like everything else important in life, it requires serious thought.

The Moral: Estate planning is a grave matter.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

Copyright © 1987-2001 A.J. Cook All Rights Reserved
This information is not intended for use without professional advise.
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Released 6-28-99