How does property pass to heirs in Estate Planning? Not everyone understands the process. This becomes problematic when heirs learn they aren’t receiving assets they thought would automatically pass to them — or when taxes or court costs take a big bite out of their inheritance. Beck, Lenox & Stolzer Estate Planning and Elder Law are please to provide the following article from The News-Enterprise, “Understanding how property passes on is crucial to planning,” that explains how assets are distributed.
There are four general categories for how property can pass to beneficiaries upon death: joint ownership, POD (Payable on Death) accounts, trusts and wills. Most estates include a combination of these methods. However, every estate plan is different and should be crafted to meet the individual’s unique needs.
A primary residence typically passes to a joint owner, usually a spouse or domestic partner. This is why homes are owned by “Joint Tenants with A Right of Survivorship.” Property owned with a JTWRS title passes to the surviving owner when one of the owners dies. This is often how married couples own homes and joint bank accounts. These rules vary by state, so check with your estate planning attorney to be sure you own your home correctly.
Jointly held assets can also be owned without a right of survivorship. Each person owns a separate interest in the property, and ownership continues after death. When one owner dies, several steps must take place to distribute the decedent’s share to their heirs. A case will need to be opened in probate court, and a will needs to be submitted if there is one. Without a will, the decedent’s shares pass to their nearest heirs by kinship.
If you don’t like your relatives, having a will is necessary to prevent your assets from going to the wrong people.
How assets are owned should be clarified during estate planning. Many cases involve surviving spouses going to court against their own children because the ownership of joint property wasn’t established with a right of survivorship.
When accounts are set up as Payable on Death (POD) or Transfer on Death (TOD), the assets go directly to the person named on the account. It sounds simple and speedy. However, there are some risks. The assets may return to the taxable estate if the intended beneficiary dies before the primary owner. If the beneficiary receives means-tested benefits because of a disability, they might become ineligible for benefits like SSI or Medicaid. Even a small distribution could disrupt years of careful planning, if it is directly into their own name.
Trusts are commonly used to pass assets privately and smoothly. The distribution directions follow the trust’s language and can be tailored as needed. Assets can be distributed based on meeting certain conditions, like getting married or attaining a college degree. A trust can also distribute specific percentages of the trust at certain ages.
Assets not distributed through the three methods described above pass through a will and the probate process. If there is no will, the laws of the state determine who inherits the property.
An experienced estate planning attorney like the ones at Beck, Lenox & Stolzer uses well-formed strategies to help clients consider how assets are best passed to their heirs. Keep in mind that every situation is different, so what your neighbor or best friend may have done may not be suitable for you and your family. A consultation with an estate planning attorney is the best way to be sure that your wishes are followed.
You are entitled to a complimentary consultation by phone with Jayson Lenox or Caroline Daiker Stolzer. At the end of that consultation, if you want to discuss your needs in more detail, our attorney will invite you into our office for a longer, more in-depth consultation, also free to you. To begin the process with the initial phone consultation, click here to schedule.
Reference: The News-Enterprise (Oct. 12, 2024) “Understanding how property passes on is crucial to planning”
