Probate vs. Non-Probate Assets
Contrary to popular belief, a Will does not necessarily
govern the distribution of all of your assets when you pass
away. Certain assets do not pass under the provision of
your Will due to the nature of the asset or the way the
asset is titled. These assets are commonly referred to as
"non-probate assets." The following are the most
common examples of non-probate assets:
Jointly-Owned Property With A Right of Survivorship. If
you own property with another person with a "right
of survivorship," the property will pass directly to
the co-owner(s) immediately upon your death. This type of
ownership may exist on bank accounts, investment accounts,
stock, bonds, real estate and other assets.
Property With A Designated Beneficiary.
Certain assets permit the designation of a beneficiary to
receive the asset upon your death. The most common examples
of these assets are life insurance policies, certain annuities,
individual retirement accounts (IRAs), and certain retirement
plans. If a beneficiary has been designated for such an
asset, it will pass directly to that beneficiary upon your
death.
Property Owned In Trust. If you transfer
property to a trust established by you or by any other person,
the property will pass according to the terms of the trust.
In most cases the trust will contain specific beneficiaries
who will receive the property of the trust when you or other
beneficiaries of the trust pass away.
Most assets which do not fall into one
of the categories set forth above will pass according to
the terms of your Will when you die. These assets are commonly
referred to as "probate assets."
Distribution of Personal Effects
Your personal effects include personal items such as
your jewelry, home furnishings, collectibles, and automobiles.
These items generally pass according to the terms of your
Will. You may provide specific gifts of these items in your
Will. You may also choose to have such items distributed
as part of your general estate.
If you desire to make specific gifts
of your personal effects but do not wish to include such
detail in your Will, you may provide for the distribution
of such items outside of your Will. For example, you may
prepare a separate list of your personal effects and designate
the recipient of each item. This type of list is sometimes
referred to as a "precatory memorandum." If you
prepare such a memorandum, you should understand that the
Executor of your estate may not be obligated to follow the
instructions you set forth in the memorandum since it is
not part of your Will. Accordingly, a precatory memorandum
provides a convenient way to express your desires regarding
the distribution of your personal effects, but it does not
afford the security of a Will.
Specific Gifts of Cash or Other Property
You may make specific gifts of cash or other property
to the persons, charities, and other organizations you designate
in your Will. If you choose to make a specific gift of cash
of other property in your Will, you should consider how
the gift will be distributed if the person you designate
does not survive you, or if the charity or other organization
does not exist at the time of your death.
Distribution of the"Residue"
of the Estate
The "residue" of your estate is the legal
term for the portion of your estate which remains after
the payment of debts, taxes and expenses, and the distribution
of your personal effects and any specific bequests contained
in your Will. Your Will should specify who will receive
the residue of your estate to ensure that all of your assets
are properly distributed under your Will and no property
is excluded. The residue of your estate may be distributed
to the persons, charities, or other organizations of your
choice.
Ultimate Beneficiaries
You should consider who will receive your property if
the persons designated as the primary beneficiaries of your
estate are not living at the time of your death. For example,
if you designate your spouse and your descendants as the
beneficiaries of your estate, who would receive your property
if none of your immediate family members survive you? The
persons or organizations who would receive your property
in such an event are called the "ultimate beneficiaries."
If there is a significant possibility that the primary beneficiaries
of your estate may not survive you, you should consider
the designation of ultimate beneficiaries. Your ultimate
beneficiaries may consist of the persons, charities, or
other organizations of your choice.
