Your estate is comprised of everything you own and potentially property you may own in the future. This includes real property such as your house and land, tangible personal property such as jewelry, furniture, and automobiles, bank accounts and stock accounts, and intangibles such as intellectual property. Collectively these are referred to as your assets.
At the time of your death, some assets are transferred to the heirs and beneficiaries through a court proceeding, and others may pass by operation of law to named beneficiaries. The mechanism to transfer assets varies based upon the type of asset and how it is titled. The two types of transfers are detailed below:
Probate Transfers (Court Proceeding)
Probate is a court proceeding to administer the estate of a deceased person. A will generally governs probate decisions. If a person has a valid will, that person can, within certain limitations, distribute their assets to anyone they choose. Wills are recommended to address the transfer of property that is not jointly owned. For married couples with jointly owned property, a will can govern the transfer of property when the second spouse dies. A will can also provide guidance on the care of children, and make determinations on the management of the estate. In some cases, a properly drafted estate plan can help heirs avoid potential estate taxes.
Non Probate Transfers (No Court Proceeding)
Non probate transfers are generally done in one of three ways: by title, by trust, and by contract.
- Title: Assets transferred by title include property owned as joint tenants or with a beneficiary designation providing for pay or transfer on death. These assets include real property, bank accounts, automobiles..
- Trust: If a trust is created and funded, a trust can contain provisions regarding transfer of property at time of death.
- Contract: Assets that pass by contract include life insurance policies and pension plans.
In most instances, a title to non-probate assets will pass at death without any court proceeding. Depending on the asset; however, other steps may be necessary to fully transfer ownership. If a person has arranged for non probate transfer of their property, this does not mean that a will is not necessary. A will is still recommended in order to provide clear administration of an estate.
