Your Estate Plan Is Only as Strong as the Coordination Behind It
Estate planning works best when wills, trusts, beneficiary designations, and financial accounts align to ensure your assets are distributed as intended.
By Scott E. Jones, BFA™, CPFA®, CRPC®, RFC®, Founder, Genesis Wealth Advisor Group
Many families sign a will, file it away and consider the job done. Years later, the family may assume that document still controls every account, property interest and financial decision.
In practice, much of what passes at death may never go through the will. Account registrations, beneficiary forms and property titling often determine who receives what. Those details may be handled by different professionals at different times, and the professionals may never compare notes.
What Does A Will Actually Control?
A will generally controls assets that become part of the probate estate. Probate is the legal process used to validate the will, authorize the executor and transfer property that is subject to the will.
Retirement accounts, life insurance policies and accounts with payable-on-death or transfer-on-death instructions generally pass according to the beneficiary designation, not the will.¹
Jointly owned property with a right of survivorship generally passes to the surviving owner. Other forms of joint ownership may work differently, which is one reason titling should be reviewed rather than assumed.
The practical takeaway is simple: the will and the beneficiary forms need to tell the same story. If a will leaves assets equally to children but an old retirement account names only one child, the account form may control that account. The result may not match the intent expressed in the will.
Where do estate plans usually break down?
The weak point is often not the legal document. It is the gap between the document and the assets.
Beneficiary forms may still name a former spouse, a deceased relative or someone selected before a child or grandchild was born. New Jersey insurance guidance warns that beneficiary changes do not happen automatically after a life event.² Retirement plans, annuities and life insurance policies should each be checked because changing one form does not change the others.
A trust can also be drafted correctly but remain unfunded. If the plan calls for an account or property to be owned by the trust, the title generally has to be changed as the attorney intended. Signing the trust agreement alone may not move an asset into it.
Charitable intent needs the same coordination. A family that plans to leave money to charity may name a charity or a donor-advised fund as the beneficiary of a retirement account instead of making the gift through the will. That choice can change how the gift is taxed. Whether it fits depends on the estate, so the attorney and CPA should weigh in before any form is changed.
Assets also change. Families sell homes, open new accounts, consolidate investments or build a business after their documents are signed. A blended family may have obligations to a current spouse and to children from an earlier relationship.
Powers of attorney and health care directives deserve the same attention. They may be missing, outdated or stored where no one can find them. The appropriate agents should generally know that the documents exist, where they are kept and whom to contact.
Why does New Jersey add another layer?
New Jersey no longer imposes its estate tax on the estates of people who died on or after January 1, 2018. The state still imposes an inheritance tax in certain situations.³
The distinction matters. An estate tax is generally based on the estate, while an inheritance tax depends in part on who receives the property and that person's relationship to the person who died. In New Jersey, spouses, civil union partners, domestic partners, parents, grandparents, children, stepchildren and further direct descendants are generally Class A beneficiaries and are exempt.⁴
Siblings and sons-in-law or daughters-in-law are generally Class C beneficiaries, with rates from 11% to 16% after the applicable exemption. Nieces, nephews, friends and most other individual beneficiaries are generally Class D beneficiaries, with rates of 15% or 16%.⁴
That makes a beneficiary decision more than a family question. It may also be a tax question. The attorney and CPA should evaluate how the rules apply to the specific estate because residency, asset type and beneficiary class can affect the analysis.
Who does what on the planning team?
The estate attorney drafts the will, trusts, powers of attorney and advance directives. The attorney also gives legal advice, interprets state law and recommends the legal structure.
The CPA handles tax filings and can assist with tax projections. The financial advisor coordinates account ownership, beneficiary designations and the retirement income plan with the legal documents.
As an advisor, I don't draft documents or give legal advice. My role is making sure the accounts actually follow the plan the attorney wrote. I can also flag when a marriage, divorce, death, birth, business change or account consolidation may warrant a fresh review with the attorney and CPA.
What does good coordination look like?
It starts with one current list of every significant account and property interest. The list should identify the owner, registration type, primary beneficiaries and contingent beneficiaries. Those details can then be checked against the will, trusts and other documents.
After a trust is signed, a funding checklist can track which accounts or properties need to be retitled and which beneficiary forms need to be changed. The attorney determines what the legal plan requires. The advisor can help carry out authorized changes at the financial institutions and confirm that the records reflect the intended ownership and beneficiaries.
In my work alongside families and their attorneys on estate planning in South Jersey, the documents themselves are usually sound. The follow-through is what needs attention. A review after a major life event is generally appropriate, and periodic check-ins may help when a family owns a business, has a blended household or is coordinating care for aging parents.
When long-term care costs are part of that conversation, long-term care insurance and Medicaid asset protection planning in New Jersey are two different ways to prepare for them. Each has its own timing rules and tradeoffs, and both are best reviewed with the attorney and advisor well before care is needed.
What should you check this year?
- When were your will, powers of attorney and health care directives last reviewed?
- Do your beneficiary forms match the intent expressed in your will and any trust?
- Is each trust funded, with accounts titled the way the attorney intended?
- Do your executor and agents know where the documents are and whom to contact?
- Do your attorney, CPA and advisor know each other, and have they ever compared notes?
An estate plan is less a document than a set of decisions that has to stay in sync as life changes. It generally works best when the legal documents, tax work and financial accounts reflect the same intent and the professionals responsible for each piece work from the same page.
Sources
- Internal Revenue Service
- New Jersey Department of Banking and Insurance
- New Jersey Division of Taxation
- New Jersey Division of Taxation
About the author
Scott E. Jones, BFA™, CPFA®, CRPC®, RFC®, is the founder of Genesis Wealth Advisor Group in Marlton, New Jersey. He works with South Jersey families on retirement income, estate coordination and tax-aware planning.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.
Securities and investment advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned, and other entities and/or marketing names, products or services referenced are independent of Osaic Wealth.
Genesis Wealth Advisor Group does not provide legal or tax advice. Please consult your attorney or tax professional regarding your specific situation.
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