Asset Transfer Pyramid – Estate Planning Explained

Asset Transfer Pyramid – Estate Planning Explained

Estate Planning Explained - The asset transfer pyramid by Steve Reh CFA CFP Reh Wealth Advisors LLC
Estate Planning Explained – The asset transfer pyramid by Steve Reh CFA CFP Reh Wealth Advisors LLC

One of first keys to Estate Planning is understanding how assets transfer.  The “Asset Transfer Pyramid” provides are great visual aid.  The top of the pyramid takes priority.  If an asset transfers by any step above, it will ignore the layers below it on the pyramid.  Therefore, to check how an asset transfers you:

  1. First check if the asset transfers by title
  2. Then check the beneficiary designation (if it has one)
  3. If owned by a trust, the asset can pass via the trust document. In order for an asset to pass via trust, it must not pass via title or beneficiary designation.  A trust can be the owner via title and the trust can be named a beneficiary.
  4. If the asset does not pass by Title, Beneficiary Designation or Trust, the asset will likely pass through probate (below the dotted line). Probate is a legal process in court that identifies and distributes a person’s property.
  5. If there is a will, the probate court will enforce the wishes of the will.
  6. If there is no will (called intestate), it will pass according to state law.

By using these rules, you can craft an estate plan that will help you achieve your goals.

Jennifer L Field is an attorney in Claremont and an expert in Estate Planning.  I have asked her to help answer some common questions she sees with titles and estate planning.

Common Asset Transfer Problems by Jennifer L. Field

  1. Not doing anything – The most common mistake in asset titling is not making any arrangements with the financial institution regarding what will happen at your death. If your asset is 1) not held in trust, 2) doesn’t have a joint tenant, and 3) doesn’t have a named beneficiary, that asset will be subject to probate when you die.  That means 1) the asset won’t be available to your heirs for a minimum of 40 days, 2) your heirs may require a full probate proceeding to access the asset, and 3) the asset may not be distributed as you wish.  There are some circumstances in which leaving an asset titled in your name alone is a valid estate planning decision.  However, the consequences of doing so should always be examined before making that decision.
  2. Holding property in one spouse’s name only – Most married couples hold most of their community property assets in joint tenancy. Joint tenancy implies an automatic right of survivorship.  That means when the first spouse dies, the asset will go to the surviving spouse as a matter of law.  (Although there may be a little paperwork needed to formalize the transfer.)  But some married individuals hold assets in their names alone.  Sometimes this done intentionally, often it is not.  If the consequences of doing so are not considered, holding property in this manner can result in a court probate proceeding and assets being transferred to individuals other than the surviving spouse, such as children (including minor children, which creates another area of problems) and other relatives.Image Courtesy of Stuart Miles at
  1. Not understanding which document will control – Many people assume that if they have a will or a trust, every asset will be governed by that document. That is not the case.  For example, properties held in joint tenancy will go to the surviving joint tenant(s) and accounts with named beneficiaries will go to those beneficiaries.  This will be true even if the result conflicts with the terms of your trust or will.  Only assets titled in the name of the trust will go pursuant to the trust instrument.  Assets that don’t fall into any of these categories will go pursuant to your will, or if there is none, according to state law.  It is important to carefully consider where you want each asset to go on your death and make sure that your estate plan will produce that result.
  1. Not updating designations/document after major events – Events such as births, deaths, marriages, divorces, changing medical conditions, changing residence locations, and changing relationships all may potentially result in a change being made to one or more estate planning document. Any time one of these events occurs, it is important to review your estate plan in light of that change and consider whether you should make any changes to your provisions.
  1. Naming minors as beneficiaries – Although it is fairly common to name minor children as direct beneficiarImage Courtesy of David Castillo Dominici at FreeDigitalPhotos.neties of life insurance and retirement accounts, it is usually a bad idea to do so. A minor beneficiary cannot inherit, so a court Guardianship proceeding will generally be required.  This is both expensive and inconvenient.  In addition, guardianship courts do not have power to continue to control the asset once the minor reaches adulthood.  Thus, the child will receive the inheritance in full, no strings attached, at 18.  If you have minor beneficiaries, and you wish to avoid guardianship, you should consider creating an trust to hold these assets after your death.  You can name who you wish to be in charge of the assets and set forth the purposes the assets can be utilized for.
  2. Not funding your trust – Some people believe that merely creating a trust is sufficient to avoid probate. No so.  In order for an asset to be part of a trust, title to that asset must be transferred to the trust.  Simply discussing the asset in the trust or listing it on a schedule of assets will not transfer title.  You must actually make the trust the owner of that asset.  For real property, a deed must be recorded.  For accounts at financial institutions, you must change title with the institution itself.  Only then will the asset truly be owned by the trust.  Likewise, keep in mind that pour-over wills that leave your estate to your trust do not avoid probate.  They simply direct your assets to the trust in the event that probate is necessary because title wasn’t transferred during your lifetime.  Check out the article on Retirewire on: Living Trusts – common problem solved! Please fund your trust
  1. Using joint tenancy as an estate planning device – It is generally a bad idea to try to take an estate planning shortcut by adding a beneficiary to an asset as a joint tenant to avoid probate. Doing so creates an irrevocable gift to that beneficiary and establishes the beneficiary as a current owner of the asset.  This results the asset being subject to the beneficiary’s creditors and many other major unintended consequences.  Generally speaking, a trust is the more prudent way to avoid probate.
  2. Not considering retirement accounts – Careful thought must be given as to how tax deferred assets should be planned for.  They should not be transferred to a trust during lifetime.  Instead, beneficiary designations should be used to avoid probate.  It is possible to name a trust as the beneficiary, but the consequences of doing so should be discussed with your attorney as it may result in unintended tax consequences.

Thank you for the opportunity to address these common issues.  Please feel free to contact me regarding any estate planning questions you may have.

Law Office of Jennifer L. Field
405 N. Indian Hill Boulevard
Claremont, CA 91711
(909) 625-0220



Thank you Jennifer for contributing your expertise to this article.  I hope you found our Asset Transfer Pyramid and Jennifer’s Comments Helpful!


UPDATE 10/6/2016 – Check out the article I wrote for Retirewire discussing a similar topic

Living Trusts – common problem solved! Please fund your trust



UPDATE 3/14/2017 – Check out the article on Retirewire where I help explain a Potential Estate Planning Issue with Power of Attorneys.



** The information in this article is intended only for informational purposes. Investors should not act upon any of the information here. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Confusion Image Courtesy of Stuart Miles at

Child with money Image Courtesy of David Castillo Dominici at

529 Plans, Common Questions – US News and World Report Quotes Stephen Reh of Reh Wealth Advisors LLC

529 Questions - Common Questions About Withdrawals
529 Questions – Common Questions About Withdrawals

Andrea Williams wrote a great article on 529 Plans covering 4 questions that people commonly run into.  She quoted me in the article and you can read about it below:

Brief Synopsis:

1) Are Laptops/Computers a Qualified Expense? – Laptops, desktops, and in my opinion, any high dollar equipment for school are only qualified if they are required for the class.  For example, if you are taking a cooking class and they provide mixers and you are not required to buy one, you can’t buy that Kitchen Aid Mixer you have been looking at with your 529 funds.

2) What if the student earns a Scholarship and no longer needs the Funds? –  You can withdraw funds for the amount of scholarship and avoid a penalty but you will pay pro-rata capital gains on any tax deferred earnings.  Alternatively, you can change beneficiaries and use it for another students education expenses.

3) Can you pay for Off-Campus Housing? – Yes but you need to contact the school to determine what the Federal Allowance for financial aid purposes for off campus housing.  You cannot exceed that amount.

4) When is the right time to Withdraw Funds? – You will want to withdraw funds in the tax/calendar year you pay the expenses.

** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

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ETF s – Exchange Traded Funds – It’s What’s Inside that Count!

ETF, Easy to understand Analogy, How are they priced, Are they cheaper?, Are they Diversified?

ETF s – Exchange Traded Funds – It’s What’s Inside that Count!

In our previous entry about mutual funds and how they are best understood as simply a “bag” that holds investment assets. (Mutual Funds Explained, “Bag” Analogy ) Today we are going to delve into Exchange Traded Funds or ETFs.  I have some good news…….

If you understood our article on mutual funds, ETF’s will be REALLY easy to understand.  An ETF is simply another bag.  Lets take our grocery store analogy.  When you get to the check-out counter,  you are asked, “Paper or Plastic”?  Does the bag really impact what you eat for dinner or is it what your put inside the bag what matters?  Of course it’s what’s inside that counts!

It’s What’s Inside that Count!

Growing up, I heard the lesson time and time again, that its what’s inside that counts.  Meaning that a person’s character is the most important feature and its important to maintain good character.  The same is true for ETF’s.  By merely being an ETF, the investment is NOT automatically superior than a mutual fund! What are the assets invested in?  The thought process and analysis is the same as a mutual fund, what does the ETF or fund invest in?  Is it diversified, what are the objectives.

How are ETF’s Priced

With ETF’s I have to be careful to avoid getting too complicated.  So we are going to keep it as simple as possible.  In general, ETF’s will trade very close to their net asset value (what all the assets/investments inside the bag are worth, check out the mutual fund bag article for a better explanation).  I thought about giving the detail reason WHY but then decided that’s an advanced topic.  Just understand that they trade very close to what the assets are worth inside.

One difference from a mutual fund is that the ETF will trade throughout the day similar to a stock.  If you want to buy an etf at 7:45AM you can.  With a mutual fund, you would have to wait until the end of the day.  I think this is a minor point/issue with ETFs.  A long term investor should not care if the trade completes at 7AM vs the end of the day.  It does however, bring up an important point about ETFs.

Some ETF’s are not as liquid (don’t trade very often), so if you are placing a large trade relative to the volume for that ETF, you should be cautious.  This danger can be viewed as a hidden cost of an ETF as the price may move to be able to complete your trade.

ETF’s have a bid/ask spread.  Similar to a stock, an ETF has a price it can be bought for and a price it can be sold for.  This fact should be viewed as a transaction cost to the investor.  Some ETF’s have larger differences between the bid and the ask and therefore cost more.

Many times when comparing an ETF vs a mutual fund, people will forget the hidden cost of liquidity and big ask spreads when comparing to mutual funds.  It’s important to look beyond the expense ratios of the two investments.


ETF’s Are not Always Cheaper!

There seems to be an assumption that ETFs are always cheaper.  Often times they are but there are times they are not.  The expense ratio for Pimco’s Total Return ETF is higher than the Institutional Share class of the Total Return Mutual Fund.  If I have access to both investments, I would pick the mutual fund because the mutual fund has a lower expense ratio that negates some of the advantages to the long term investor the ETF might have.

The Take Away

Mutual funds and ETF’s are just bags or ways to hold assets.  Look inside them when evaluating what they do and how well they do it.  Do not assume ETF’s are cheaper.  Look at liquidity and bid-ask spreads to get the full picture.


** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.


Image courtesy of digitalart at

Mutual Funds Explained, The “Bag Analogy”

Mutual Funds Explained, The “Bag Analogy”

Mutual Funds Explained, The "Bag Analogy"

Mutual Funds despite their wide use in 401k plans and by individual investors are still often misunderstood.  In this article, I hope to help you gain a greater understanding of these investment vehicles.

The “Bag Analogy”

I find analogies work well when trying to explain concepts.  I like using what I call the “Bag Analogy”.  Everyone understands what a bag is.  It can be brown bag from the grocery store, it can be a plastic bag, or it can be a duffel bag.  What is a bag’s purpose?  To hold “stuff”.

What is a mutual fund’s purpose?  To hold “stuff” (securities such as stocks and bonds).

If I told you had a brown bag, would you know what I had inside?  Could it be eggs? Golf Balls? Trash?  You really don’t know.  Similarly, if someone says I have a mutual fund.  Do you know what it invests in?  Do you know if it’s diversified?  What is its purpose?

A mutual fund can hold stocks, bonds, CD’s, other mutual funds, and other instruments.

It’s what is inside that count!

Similar to most bags, the value is what is inside.  Some mutual funds invest in stocks, some in bonds, and some in more complex strategies.  It important to understand what you are buying.

How are Mutual Funds Priced?

Open end mutual funds total up the value of all the investments owned (the “stuff” in the bag) at the  end of the day and then divide by the number of shares to come up a fair value of the price of the shares (The finance jargon for it is “net asset value”).  Let go back to the paper bag example.  Image you and 5 friends send someone to the grocery store to get groceries for dinner.  When they get back you have a bag full of groceries.  You then look at the value of the groceries (total asset value) and divide by the number of people (5 shares) and arrive at a fair price (net asset value).

The Take Away?

Understand that mutual funds are just a legal structure or “bag” that holds the investments.  The structure give you access to different investment strategies but for this article, I just want you to focus and understand that a mutual fund is mostly a structure and we look inside when making decisions about it.


Exchange Trade Funds (ETF s)- Check out our other Article

Check out my article other article that covers a similar investment vehicle here: ETF s – Exchange Traded Funds – It’s What’s Inside that Count!


Other Good Sources of information about mutual funds:

** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.


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Auto Insurance, Homeowners Insurance, and Medical Insurance – Save Money by Self Insuring with a Higher Deductible

Saving Money Through Higher Deductibles

Have you saved up enough money for an emergency fund?  Have a liquid investment account that you could tap if you needed a couple grand? Consider saving yourself money by choosing a higher deductible automobile or homeowners policy and lowering your premium.  I would argue for most people that can stomach the idea of a higher deductible, they will realize true savings over their lifetime.  The same principles apply to business owners and self employed people when deciding their health plan.

I prefer to call the concept “self insuring”.  By selecting a higher deductible (amount you have to pay out if their is at at fault claim), you save money on your premium every year.  However, should you need to make a claim, you will have to pay more out of pocket for the repair.  In general, you need to be making claims every 2-3 years in order for the lower deductible to be a better deal.  Further, if you are making claims that often and they are relatively minor claims (backed into a pole at the super market), your premium rates are likely increasing because of the claims.

By taking the risk of the first $1k or $2k in out of pocket claims (deductible) vs the typical $500,  you will likely save a decent amount of money over the long haul.  So for that extra $500 to $1,500 of risk, you are being compensated for taking the risk away from the insurance company.  The most important part of your insurance, which is protecting you against catastrophic loss that could impact your ability to reach your goals and retire, remains protected.

For those who have control of their medical insurance options,  the same principles apply to medical insurance, with a high deductible plan will save you in premiums as you are self-insuring the first few thousand of claims and in most years you will benefit from the savings.   You also retain disaster coverage as your insurance starts to pick up the bill after the deductible is reached and most of these plans have a max out of pocket clause.

So when you review your insurance coverage, consider the deductible vs the potential savings from a lower premium.

** Please note, I do not sell property and casualty insurance.  As part of my fee-only service, I provide property and casualty insurance reviews as part of their financial/investment plans to ensure my clients are properly and efficiently protected.

**Information in this post is for educational purposes, please contact us for specific advice on your individual situation to determine what is appropriate. 

“Put” on Interest Rates – The 30 year Mortgage

The 30 year mortgage offers a valuable put for investors.  Often times, a mortgage is a large tool that can help in uncertain interest rate times.  The 30 year mortgage allows you to benefit if rates move up or down.

1) If rates rise, simply keep your mortgage and be thankful that you have a low interest rate.

2) If rates drop, refinance and lock in a new lower rate.

This valuable “put” or option, is a valuable tool in your complete financial plan.  Check out my more detailed article here:

Beware the 3 and 5 Year Numbers: 2015 Mutual Fund Analysis (Brightscope Article by Steve Reh)

Check out the article I wrote on Brightscope regarding analyzing your investment performance this year.

Beware the 3 and 5 Year Numbers: 2015 Mutual Fund Analysis

Beware the 3 and 5 Year Numbers: 2015 Mutual Fund Analysis


  1. Most advisors evaluate manager performance through an entire economic cycle
  2. Since 2008, market performance has been mostly up
  3. 3 and 5 year performance numbers do not include a down market
  4. Place greater emphasis on the 10 year performance number to capture the entire cycle.

If you have any questions, please do not hesitate contacting me.



** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.