When most people think about estate planning, they focus on who will receive their assets after they pass away. Just as important, however, is how those assets will transfer.
Many people assume a will controls everything, but in reality, assets can pass in several different ways. Some transfer by state law, some by beneficiary designation, and others through trusts or joint ownership arrangements. Each method comes with its own trade-offs.
Understanding these six common paths can help you make informed decisions, avoid unintended consequences, and create a plan that reflects your wishes.
Path 1 – You do nothing and pass away “intestate” – without a will
Control: X None: everything passes through state law.
Cost: $$$$ High: attorney fees, court fees, executor fees (est. 6–8% of the gross estate). Delays could be extreme, and costs stack up.
Privacy: X None: probate is a public process.
Potential Drawbacks:
- Widowers with children may get as little as 1/3 of the estate.
- The only contest is arguing that the state’s formula was applied incorrectly.
- The guardian of minor beneficiaries must report to the probate court annually and justify how inherited funds are spent.
Court-appointed administrators, attorneys, and bonding requirements can further reduce the value passed to heirs.
Path 2 – You gift it all away during life
Control: X None: the money is no longer yours.
Cost: $ Low: no fees or commissions.
Privacy: X Yes: you can remain an anonymous donor.
Potential Drawbacks:
- Lose all control – no changing the terms of the gift.
- Can’t use the gifted property for collateral, refinance it, take a reverse mortgage, etc.
- Probate can result if gifts aren’t completed before you pass.
- Subject to 3-year lookback rule: if you pass within 3 years of giving the gifts, they can be included in your estate.
- State & federal gift tax could apply.
- No step-in basis for the recipient: If a fundamental change happens inside the organization, the money could go to something you didn’t intend.
Path 3 – Your assets are held in a Joint account with Right of Survivorship (JTWROS): Passes by operation of law to surviving joint owners
Control: X Limited by the other partner.
Cost: $$$$ High: attorney fees, court fees, executor fees at the second death (est. 6-8% of the estate).
Privacy: X None. Probate is a public process that lasts 6 months to 2 years on average.
Potential Drawbacks:
- Survivors are subject to all owners’ debt.
- Owners can act on their own without the other’s approval.
- The survivor may go against the wishes in a will or trust.
- Typically, only receives a ½ step-up in basis.
- Forfeit available estate exemption (bigger problem when portability isn’t an option).
- Next to gifting property away, it’s the best way to lose control of your assets.
Works well when:
- Used between spouses who view their money together
- In conjunction with a TOD/POD (Transfer on Death) after the joint owner passes
- You trust the joint owner
Path 4 – All assets are TOD (Securities) or POD (Cash Accounts)
Control: X Yes: the client maintains complete control.
Cost: $ Low: avoid probate fees.
Privacy: X Yes: money transfers outside of court.
Potential Drawbacks
- Some states don’t allow unequal POD/TOD shares (non-issue in WI).
- Can’t disinherit a spouse or avoid creditors. The court won’t rule in your favor if a legal battle ensues.
- Need to present proof of ID and death certificate for access.
- Government bonds can have only one beneficiary.
- No TOD for securities in the District of Columbia, New York, and Texas.
Works well when:
- Your beneficiaries are not minors – can’t legally own assets without a custodian
- Beneficiaries outlive the client
- Beneficiaries get along
- Beneficiaries get an equal share
- You confirm beneficiaries before incapacitation
- Used in conjunction with a will or a trust
Path 5 – You write a will only
Control: X Yes: the client maintains complete control and can change their will at any time.
Cost: $$$ High: attorney fees, court fees, executor fees (est. 6-8% of the gross estate).
Privacy: X None: probate is a public process.
Potential Drawbacks:
- Assets subject to the will may be subject to probate before being distributed to beneficiaries.
- Any interested person can contest a will in court
- Multiple probate proceedings may be required if you own real estate in more than one state.
Works well to:
- Name a guardian for a minor
- Assure an orderly small estate probate.
- Designate an executor to administer your estate.
- Dispose of unexpectedly acquired property or future property.
- Disinherit a child (although it might not hold up).
- Close off claims from creditors (the court will close off claims after a set period, usually 3-6 months).
Path 6 – You create a Revocable Trust
Control: X Yes: the client maintains complete control and the trust rules when incapacitated.
Cost: $$ High at creation, low at death (<1%). All in, a trust will be less expensive than a will if the estate is larger than the small estate cut-off.
Privacy: X Yes: money transfers outside of court (estate settles within 30 days).
Potential Drawbacks:
- Assets must be properly retitled into the trust for the trust to work as intended.
- Might need to remove property from the trust to refinance. Providing a certified abstract of the trust might allow you to keep the property in the trust.
- Common contests:
1. Second marriage and children from the first marriage feel shorted.
2. One child is favored over other children, or disinherited, or not otherwise provided for.
3. An individual has no close relatives.
4. An extramarital relationship exists and the partner is named rather than a family member.
Works well when:
- You wish to avoid probate and maintain privacy regarding the distribution of assets.
- You have minors and would like to control asset distributions
- You have property in multiple states
- Your estate is larger than the small estate cut-off ($50k in WI, including vehicles)
- You own a business or family farm (avoid distress sale and probate filings)
- You transfer property to the trust
- You name a reliable successor trustee and keep the document up to date
There is no one-size-fits-all estate plan. The right approach depends on your family situation, the types of assets you own, whether you have minor children, and how much control you would like to maintain during your lifetime and after death.
Fortunately, many of these issues can be addressed with thoughtful planning. Whether your estate plan relies on beneficiary designations, a will, a revocable trust, or a combination of strategies, regularly reviewing your documents can help ensure your wishes are carried out and make the process easier for those you leave behind.
At Jacobson & Schmitt Advisors, we help individuals and families evaluate how their assets are structured, identify potential gaps in their estate plan, and coordinate with estate planning attorneys to create a plan that reflects what matters most.
If you’d like a second opinion on your estate plan or want to better understand how your assets will pass to your loved ones, schedule a complimentary consultation with our team.
