How Will Your Assets Pass Upon Your Death?
Have you ever wondered what happens to a person’s assets when they pass away? Just about everyone knows about a Will, and that it includes instructions on how to dispose of a decedent’s assets after death. But did you know there are other ways of transferring assets to your loved ones at death? Below explains three methods – Contract, Operation of Law, and Probate.
Passing By Contract
The first method of transferring assets upon the owner’s death is through various contracts. This is an arrangement to have money and assets transferred upon the asset owner’s death to the people previously designated by the asset owner. This form of transferring assets is very common, and includes these arrangements:
(2) Life Insurance Policies;
(3) Individual Retirement Accounts;
(5) Buy-Sell Agreements
(6) Payable on Death Accounts
(7) Transfer on death designations
One benefit to using contractual arrangements for transferring assets is that the right of the beneficiary to receive that asset exists at the moment of the owner’s death. When executed properly, (barring any extraordinary complications) the transfer can occur rapidly with minimal effort by the beneficiaries. The use of a contractual arrangement, such as a funded living trust, allows you the peace of mind of knowing that your wishes will be followed in an efficient manner at the time of your death.
The key to using contracts to swiftly transfer assets upon the owner’s death is to plan far enough in advance to fully reap its benefits. This is especially true of contractual arrangements such as Life Insurance Policies and Annuities, which can become financially infeasible, or even unattainable, the older the applicant becomes. Certain types of contractual arrangements come under close scrutiny if they occur near to the asset owner’s death.
Passing by Operation of Law
A second method of transferring assets upon the asset owner’s death is by operation of law. This technique applies to situations where the asset owner holds title to an asset with another person. Forms of holding assets include:
(1) Joint Tenancy with Rights of Survivorship
(2) Tenancy by the Entirety
(3) Community Property with Rights of Survivorship
(4) Life Estates
The “survivorship” aspect transfers full ownership immediately upon the co-owner’s (or life tenant’s) death to the remaining owner(s) (or remainder interest holder).
This technique differs from the contract method of asset transfer, as the beneficiary under a contract rarely has an ownership interest in that asset until the owner’s death. Conversely, under a transfer by operation of law, the recipient becomes a co-owner of the asset upon taking title to the assets.
Passing by Probate
A third way in which assets are transferred upon the asset owner’s death is through Probate. This is the process through which title is changed from the decedent’s name into the new owner’s name. Probate, (depending upon the state in which the asset owner resides and where property is located) can be an expensive and time-consuming process. Probate is a public court proceeding, allowing anyone to know your personal details and financial holdings.
Probate is mandated if you die without a Will. The court must determine who is to receive your assets as prescribed by state law. However, many people do not realize that Probate is also required if you die with a Will. “Probate” means “to prove a Will.” If you have disposed of your assets through an alternate means of transfer (“Contract” and “Operation of Law”), the process can be expedited in many states.
The Decision is Yours
The bottom line is that you have a choice – you can dictate how your assets are transferred upon your death. Knowing this fact gives you an advantage over many people, but use that knowledge to benefit yourself and your family. Consult with a qualified attorney to discuss which methods are appropriate for your circumstances.