A Last Will and Testament is an important document to have in place. Two of the most important purposes of a Will are to name who you want to receive your assets when you pass away (your beneficiaries) and who you want to administer your estate when you die (your Executor). However, a common misconception is that everything you own when you pass away is governed by your Will. For many people, this is not the case.
The assets passing through your Will when you die are often referred to as probate” assets.” This term derives from the official process of opening an estate for a decedent. Some common examples of probate assets include a checking or savings account in an individual’s name solely, personal property, and real estate in decedent’s name alone.
There are various assets that do not pass through a person’s Will. Common examples of assets that generally do not pass through a Will in Pennsylvania include:
Beneficiary Designated Assets. Assets that have a named surviving beneficiary, such as a life insurance policy, annuity, or retirement account, pass according to the contract to the named beneficiary or beneficiaries.
Certain Jointly Held Assets. Bank accounts that are jointly held pass to the surviving party or parties on the account. Real estate held as joint tenants with right of survivorship becomes the surviving joint owner or owners asset at death.
Assets with a Transfer on Death (TOD) or Pay on Death (POD) Designation. Typically, a TOD or POD is going to be found on a brokerage account. Unlike a joint account, TOD or POD accounts are in the owner’s name alone during lifetime. At death these accounts pay to the person or persons designated as the TOD or POD beneficiary.
Real Estate with a Retained Life Estate. When the life estate owner dies, real estate with a retained life estate passes to the remainder person or persons named as remainder grantees in the deed.
Trust Assets. Assets owned by a revocable or irrevocable trust will pass to the beneficiaries of the trust.
Therefore, for a lot of people, an estate plan is more than just what your Will states. There are advantages and disadvantages to assets passing through your Will or outside of your Will. While probate is one consideration for clients, income taxes, inheritance taxes, and long-term care implications all must be taken into account when determining how assets are titled in an estate plan. How to hold assets depends on each person’s specific circumstances. A certified elder law attorney can advise you as to the best way to structure your assets.