Transferring property at death can be a confusing issue for families. It’s not clearly understood by people who are doing their planning or by their family members who will be doing the transferring. Here are 3 categories of property that transfer at death.
There are basically three types of property that transfer at death.
Type 1: Property that passes by contract.
If you have insurance policies, IRAs, retirement and brokerage accounts, and bank accounts you can name a beneficiary for each of those accounts. You do this by completing a Pay On Death form for each bank and brokerage account. On your death, the company is notified, and they send a check to your named beneficiary. If a beneficiary has not been named by you, or the beneficiary is deceased, then the account will fall into category 2. If your named beneficiary is the trustee of your trust, the property will remain in this category. Funds will be paid into the trust and the trustee will then distribute the funds as part of the trust estate.
Type 2: Property that needs a change of title.
If you have real estate, vehicles, mobile homes, recreational vehicles, boats and airplanes the process to transfer these after your death is similar to a sale. Your executor is authorized to sign the title or deed to transfer the property after being appointed by the court to act for the estate. Many people believe the person has that authority just by being named in the will, but this is not true. Your will has to be probated and the executor appointed by the court for the executor to be able to transfer your property. If you have a trust, and the property was transferred into the trust, your trustee has the authority to sign the deed or title.
Type 3: Property with no title and no contract
This type of property includes your personal property and pets. Although many people value their personal items, most of those items are really worthless. If your estate only has typical personal and household items outside of your Type 1 property, and your family agrees on what to do, there is no need for a probate.
This is a short summary of the types of property that most people have in their estate when they pass. The ease or difficulty of transferring different types of property at death depends on how your planning works with. Assets can be moved from one category to another depending on what you want in your estate plan.
For more information, contact Carla.
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