When beginning the estate planning process, two important issues to consider are how your assets are titled and who you have named as your beneficiaries. Understanding the consequences of how you own your property and who you have named as your beneficiaries can help avoid some of the common mistakes that may lead to your property being distributed after your death in a different manner than you intend.

With sole or single ownership, one name is on the property title, and one person has complete ownership of, and control over, the property. A sole owner can choose to sell, give, or bequeath the property to others as he or she wishes. Assets titled this way receive a full step-up or step-down in cost basis when you die.

Assets titled in single name without designated beneficiaries are generally subject to probate. The assets will pass according to your will or, if you don't have a will, according to your state's intestacy laws.

If you are the sole owner of your assets and become incapacitated, no one will have authority to manage your assets unless you previously named an agent in a durable power of attorney. Without a durable power of attorney, probate court proceedings would be required, so that a judge could appoint a guardian or conservator to manage your assets under court supervision.

Under joint tenancy with right of survivorship, all joint owners have full rights to the property, and ownership cannot generally be changed without the consent of all owners. When one of the joint owners dies, these assets avoid probate and transfer directly to the surviving owner. The transfer of the jointly held asset is not controlled by a will or trust. The availability of a "step-up" in cost basis can vary, based on whether the joint owners are married. It is important to maintain financial and legal records evidencing each partner's contribution if you are not married and decide to own assets jointly. There are certain potential unwanted consequences you need to consider when assets are titled in joint tenancy with right of survivorship.

Joint tenancy with right of survivorship is often used as a "will substitute." It often appears attractive to LGBT individuals because by placing property in joint tenancy with a partner, you can achieve a relatively simple, direct transfer of property at death (which is less susceptible to challenges from relatives). Joint tenancy can also facilitate shared management of property during your lifetime.

However, this form of ownership also has weaknesses, so it's important to be aware of the advantages and disadvantages:

  • Once created a joint tenancy cannot be easily changed, unless both joint tenants agree.
  • It's important to understand that joint tenancy gives both joint tenants the ability to control, access, and use property.

In the event that one joint tenant is disabled or legally incapacitated, financial institutions will typically require that the nondisabled joint tenant have a durable power of attorney before allowing certain actions.

Financial institutions will sometimes require the consent of both joint tenants for certain actions, such as the transfer of an account.

The surviving joint tenant has complete control over the ultimate distribution of the property. The first deceased partner's family or beneficiaries may be effectively disinherited if joint tenancy titling is used by the partners or spouses.

When one person owns real estate individually and transfers title into joint tenancy with another person who is not a spouse, this creates a "taxable gift" if the value exceeds $14,000 in 2016. In most situations, no gift tax is due. But this does require filing a gift tax return and using up part of your federal lifetime gift exclusion. If you are married, placing property in joint tenancy with a spouse is not a taxable gift due to the unlimited marital deduction.

With bank or brokerage accounts, a gift occurs when a noncontributing, nonspouse joint tenant withdraws funds from an account.

At the present time, with the historically high estate tax exclusion ($5,450,000 in 2016), federal estate and gift tax is not a concern for many individuals. But for individuals and couples with significant assets, decisions about how to own property can have major estate and gift tax consequences.

Additionally, it's important to be aware that creditors may make claims against joint property, depending on state law. For example, if an individual names someone else on his or her account, but the added owner incurs substantial debt, the creditors of the added owner might pursue the assets in the joint account.

Finally, probate-supervised guardianship may be necessary with this type of titling when one joint owner becomes incapacitated. If the incapacitated joint owner does not have a durable power of attorney, it may be necessary to have a guardian or a conservator appointed by the probate judge to control the incapacitated individual's interest in the account.

Tenancy by the entirety is similar to joint tenancy with right of survivorship, but can only exist between spouses. This form of property ownership is not available in most states; only about 20 or fewer states permit this form of ownership. In addition, some states recognize tenancy by the entirety for real estate only. Be sure to consult an attorney in your state to determine whether tenancy by the entirety is recognized in your state and could apply in your situation.

In general, an individual creditor of either spouse can't reach property owned as tenancy by the entirety. The amount or level of protection varies from state to state. Tenancy by the entirety does not provide any creditor protection for joint obligations or debts.

At death, property held in joint tenancy with right of survivorship or tenancy by the entirety is not subject to probate. However, when the first partner or spouse dies, the property becomes an individual asset of the surviving partner or spouse. The property will be subject to probate when the surviving partner or spouse dies.

When property is owned as tenants in common, two or more owners are entitled to possession of the same asset and can own disproportionate shares of the asset. The most important thing to know about tenants in common is that each tenant controls his or her share as though it were solely owned. There is no survivorship feature in tenants in common, so each tenant can pass his or her share to beneficiaries of his or her choosing. The deceased owner's share passes under the terms of the will and is subject to probate. If one owner becomes incapacitated, it may be necessary to have a guardian or conservator appointed by the probate court.

A number of states have community property laws for married couples. The community property states are Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin. Alaska and Tennessee also provide for election of community property treatment.

Generally any asset acquired during a marriage in a community property state is considered as owned entirely by both spouses regardless of how it is titled. At death, each spouse may transfer his or her own share of the community property by will or trust. Some states allow community property to be held with right of survivorship.

In general, all community property assets receive a full stepped-up cost basis when one spouse dies—both the deceased spouse's half and the surviving spouse's half.

Note: Some of the community property states continue to recognize civil unions, or registered domestic partnerships, but the legal landscape changes frequently. You should consult your attorney to determine if your state applies community property rules to civil unions or domestic partnerships.

Certain types of assets are transferred at death by a beneficiary designation. Beneficiary designations take precedence over a will or trust.

When you filled out an account application for annuities, life insurance, IRAs, or retirement plans, you were most likely given the opportunity to name a beneficiary. You may have also named beneficiaries for a transfer-on-death or pay-on-death account. The person(s) or charitable organization(s) you named as beneficiary will receive these assets upon your death. It is important to name both primary and contingent beneficiaries.

Some states permit non-probate transfers of real estate by means of a transfer–on–death deed or beneficiary deed. A beneficiary deed allows real estate owners to designate a beneficiary on a properly executed and recorded deed. The named beneficiary does not have any ownership interest in the property during the owner’s lifetime. The property will not transfer to the named beneficiary until the owner’s death, bypassing the probate process. Beneficiary deeds are not available in every state. Your attorney can help you determine if this type of planning is appropriate for you, and if it is available in your state.

As your life circumstances change – such as deaths, births, marriages, divorces – review beneficiary designations with your attorney and tax advisor to ensure they are coordinated with your estate planning goals and documents.

If you get divorced or split up with a partner to whom you are not married, it is very important to remove that person from all of your beneficiary designations (if you no longer wish for that person to inherit your assets).

Even with the recent Supreme Court rulings, it is still important to make beneficiary designations and specify who will receive the assets in the event of your death. If you make beneficiary designations and keep them updated, property will pass to the beneficiary you specify.