Feb 22, 2023 11:00:00 AM | Estate Planning Estate Planning and Bank Accounts: 5 Tips to Ensure They Are in Sync


Key Highlights

  • An estate plan is not just for the wealthy. Anyone can benefit from making their wishes known, even if they own a limited amount of assets.
  • Your estate includes everything you own, including cash, cars, houses, saving and investments, land, insurance policies, clothing, jewelry, and more.
  • Aligning your estate plans with your bank accounts ensures they are maintained, managed, and distributed as per your wishes upon death.
  • Estate planning gives you confidence and perspective on your financial decisions.
  • Syncing your bank accounts to your estate plans can help you avoid probate and pass assets on to beneficiaries without hefty taxes.

What Is Estate Planning?

Estate planning is a strategy for designating who receives your assets upon death or in the event you become incapacitated. The goal is to ensure that your wealth goes to those you intend, with a particular emphasis on reducing taxes so the beneficiaries can maximize their inheritance. It is an opportunity to have a say in how your assets are handled while you still can. Your estate plan is recognized and enforceable by law, and in its absence, it will be up to the courts to determine who gets what from your pool of assets.

Importance of Estate Planning 

An estate plan allows you to get a comprehensive look at your assets, both tangible and intangible. This ensures that in the event of death or incapacitation, there is someone to take the critical role of ensuring your wishes are taken care of. It clarifies your directives which prevent family disputes, whether a little tiff or a full-blown lawsuit. Finally, an estate plan speaks for you when you cannot and prevents loved ones from wondering what you would have wanted. 

The goal of state planning is to look  out for yourself, your assests, and your loved ones. It can help account for your medical care directives and your dependents’ needs. The ultimate benefit is that it puts you in control regardless of what happens to you.

5 Tips to Ensure Your Banking Aligns With Your Estate Planning Goals

When planning for your future and that of your loved ones, aligning your assets is just as crucial as establishing trust. When your assets are aligned, you can avoid probate and have the assets directly passed to the intended beneficiaries. Unfortunately, bank accounts are not physical assets and can easily be overlooked after your death, leaving part of your assets unmanaged. Here are some tips that will ensure that handling your banking accounts aligns with your estate planning goals:

1. Review and Update Beneficiaries in Your Bank Accounts 

Banks and other financial institutions only sometimes ask you to designate a beneficiary when joining. Therefore, It’s easy to forget or dismiss including one in your accounts. However, this little detail is important because it makes handling and transitioning your assets smoother when you pass on or become incapacitated. In addition, including a beneficiary allows you to choose who you want to receive your assets or where your money goes after you die.

Naming a beneficiary also simplifies and hastens the probate process. You should, therefore, regularly review the beneficiaries of your accounts to ensure your money goes to the person you want to have it and that it is in line with your estate planning goals.

2. Consolidate Accounts

Consolidating accounts means putting all or several bank accounts into one central account. In addtion to bank accounts, investment accounts and life insurance policies may also be included. This makes estate planning and management much more straightforward. Otherwise, putting your estate's assets in order will demand more time and money, eventually dipping into the inheritance left to your loved ones.

3. Retitle Your Bank Accounts

To avoid probate, you can also consider retitling your accounts. One common way to do this is to use joint tenancy with the right of survivorship. This type of account is automatically passed to the surviving account holder when you die, as often as is the case with married couples having a joint account. A joint tenancy with a right of survivorship account is an easy choice for a simple estate that does not exceed prevailing estate tax thresholds or require advanced planning. It also supersedes a will.

Another way to retitle your bank accounts is by adding a designated beneficiary title that automatically gains control of the account upon your death without going through probate. However, the title, also known as payable on death (POD) or transfer on death (TOD), will not allow your trustee to manage the account if you become incapacitated, and in such an instance, you will need a power of attorney for someone to act on your behalf while you are still alive.

4. Keep a Copy of all the Necessary Documents

Communicating every tiny detail about your bank accounts and other assets is difficult. Therefore, it is crucial to ensure you have accurate and up-to-date documents that correctly collaborate your intentions for related bank accounts and investments. Organize all documents and files safely and let your executor know where to find them after you are gone.

Important bank documents include updated details on total liabilities–such as mortgages and credit card debt, passwords to online financial institutions, beneficiary information such as copies of birth or marriage certificates, and social security details. This information helps track your banking assets and can act as proof when it is time for beneficiaries to make claims and the records with your service provider are not updated or lost.

5. Set Up a Trust Account

You can set up a trust account that guarantees your beneficiaries of financial security and stability when you die. The account will be managed by a trustee that is also responsible for distributing the funds to all entitled beneficiaries when it’s time. In addition, trusts avoid probate, which ensures your beneficiaries have access to assets more quickly, saving time and court fees. 

After putting in the work to accumulate and grow your wealth, it is only fitting that you also put a cohesive strategy for managing it after you are gone. Aligning your bank accounts to your estate plan goals is one way of protecting and caring for your loved ones even after you are gone.

Contact us for more information on how to plan your estate.