Methods Of Property Transfer At Death
Estate planning involves transfer of ownership at life and death. This section will focus on the transfer at death. There are four primary ways to transfer property ownership at death.
1) Transfers through the probate process (provisions in your will)
2) Transfers by operation of law
3) Transfers through trusts
4) Transfers by contract
1. Transfers Through Probate Process
Most people know that the probate process can be costly, time consuming and contend that it provides little or no benefit. And most proponents of the probate process argue that it prevents fraud in transferring ownership and protects inheritors from claims against the decedent's property.
The probate process consists of:
· Filing a will with the local probate or surrogate court
· Taking inventory of the decedent's property
· Pay off debts and/or creditors if any (including any estate tax owed)
· Distributing the property at the direction of the will
The reality is the probate functions are administrative and clerical. It is also important to know that all property the decedent owned, or had an interest in, may not pass through his or her will. Only probate assets pass through wills.
Assets subject to probate include: · Singly owned assets
· Contracted proceeds which are payable to the estate
· Property held by tenancy in common
· Assets where the beneficiary is "estate of the insured"
· Community property (50% attributable to each spouse)
Non-probate assets include everything else.
Please see below "Intestate Succession" for decedents with no will, but keep in mind the estate must still go through probate.
Testamentary distribution is the process in which the decedent leaves an outright bequest of personal property or real property through a will. The three types of bequests are:
· Specific bequest – A specific bequest is when you leave a specific individual or organization a specific item or certain dollar amount and describe the source. An example would be: "I leave my Harley Davidson to my grandson, Heath."
· General bequest – A general bequest is not specific in nature and gives the executor flexibility to honor the bequest. An example would be "I leave $30,000 to my daughter, Julie."
· Residuary bequest – A residuary bequest is made after all other bequests have been made and all debts paid to creditors. An example might be "I leave the remainder of my personal and real assets to the Animal Kingdom Sanctuary."
Although most people should think ahead and create a will in order to ensure that, after their death, their wishes are carried out. Not everyone makes full preparations for what will happen to their property when they die. A person who dies without a will is said to have died "intestate." If a person dies in intestate, state law may dictate how the property is distributed.
Intestacy laws vary from state to state and a person's property is distributed according to the laws of the state in which he or she died. However, if the person owned property in a different state, the property may be distributed according to that state's laws instead. Please note that each state has its own laws on who inherits property in the absence of a will.
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