You get to select the asset’s legal owner whenever you buy or obtain an asset such as a house, car or financial account (held at a bank, brokerage firm, investment management or financial advisory firm, mutual fund or annuity company, or securities custodian).
Will you own the property in your name, jointly with another person (such as a spouse or child), or will the asset be owned by a trust, LLC, or S or C corporation?
Your decision has tax implications (important, but beyond the scope of this discussion) as well as crucial estate planning implications. There are significant considerations, such as liability exposure and other factors, but for our purposes here, your selection determines who will inherit a given asset following your death – and how that asset will pass to the selected heirs.
Watch out for unintended consequences when choosing account registrations. For example, if you name only one child as TOD or JTWROS, you’ve disinherited all your other children. You could also create adverse tax and liability risks by converting “heirs” into “owners” of your assets. This is why estate attorneys often discourage their clients from using some of the ownership structures described above.
In next blogpost, we will discuss how various assets pass to heirs under different conditions.