ADLER & ADLER, PLLC
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How Property is Transferred at Death
A will can only control the disposition of property that falls within the probate estate.
Generally speaking, there are three ways that property is transferred at death:
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By will;
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By operation of law (does not fall within the probate estate); and
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By contract (does not fall within of the probate estate.)
Joint Tenancy with Right of Survivorship (JTWROS)
Joint tenancy with right of survivorship (JTWROS) is a form of co-ownership where each joint tenant is considered to be an owner of the entire property subject to the rights of the other joint tenants. A key element is the right of survivorship under which the survivors take title and possession of the entire property upon the death of a joint tenant by operation of law. Joint tenancy with right of survivorship assets are not transferable by will.
Tenancy by the entirety is a special form of JTWROS that can only be created between husband and wife. In a tenancy by the entirety, neither spouse can convey his or her interest in the property without the consent of the other.
Insurance Death Benefits, IRAs and 401(k)plans.
Another example of property that passes outside of the will is property that passes pursuant to the terms of a contract to the designated beneficiary. Some examples of property passing by contract include life insurance death benefits, IRAs and 401(k) plans.
In the case of a life insurance policy, when the insured dies, the insurer is contractually obligated to pay the death benefit directly to the designated beneficiaries. Note that if the designated beneficiary is the “estate of the insured,” then the insurance death benefit becomes part of the probate estate.
In the case of IRAs and 401(k) plans benefits are paid directly to the designated beneficiary pursuant to the terms of the IRA or 401(k) plan.
A trust agreement can also be considered a form of contract between the grantor (the person who creates the trust) and trustee. (See also: What is a Trust?)
What is the Probate Estate?
Your probate estate includes all your property that will pass through probate. Generally, this means all property you own at your death but does not include:
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Joint Tenancy with Right of Survivorship (JTWROS) property.
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Tenancy by the Entirety property.
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Life Insurance policy death benefits payable to a designated beneficiary other than “estate of the insured."
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IRAs, 401(k)s, and other retirement plans payable to named beneficiaries.
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Payable-on-death (POD) Bank Accounts.
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Transfer-on-death (TOD) Securities Accounts.
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Property transferred to a Living Trust during your lifetime.
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Community Property: Generally, when one spouse dies half of the community property automatically belongs to the surviving spouse. The other half can be passed by will.
All of the above items are considered to be non-probate property and are not controlled by your will.
Keeping Wills Up-to-Date
You should review your will at regular intervals, but especially when:
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There have been deaths, births or marriages that affect its provisions or your intentions.
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There have been substantial changes in the value of your estate.
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When you become a resident of another state.
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When the executor or administrator named can no longer serve.
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When a trustee has not been named or when a new trustee should be substituted.
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When a guardian for minor children has not been named or when a new guardian should be substituted.
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When federal or state tax laws change and affect the plan of distribution.
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When conditions have arisen in the family that make a “spendthrift” trust arrangement desirable.
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When the powers of a trustee or executor should be changed to meet situations arising since the will was drawn.
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When changes in or new business ventures require consideration of will provisions.
See also:
How Property is Transferred at Death
Estate Planning for Blended Families