Prepared by: Cynthia Leach

How Property is Transferred

Cynthia Leach

Accountant & Estate Planner

For example, suppose you write a will that gives everything you own to your spouse. You have a $100,000 life insurance policy. If you die, would he or she get the $100,000? Not necessarily.

Life insurance proceeds are transferred by contract -- they go to whomever is listed as the beneficiary on the policy -- regardless of what your will says. Annuities, IRAs, and employee benefit programs are other examples of assets that are transferred by contract. Be sure to check the terms of each contract periodically to make sure that each accurately reflects your intentions.

Property can also be transferred by operation of law. The way a property is titled may supersede the terms of a will. If you own a house with someone and the title specifies "joint tenancy with right of survivorship," your co-owner will own that house when you die, no matter what you say in your will. Some states' laws also prohibit you from disinheriting your spouse or other close relatives -- again, regardless of what you specify in your will. Several states operate under the community property system of asset ownership, which also affects how property is transferred.

Finally, and most importantly, you must use a will -- and perhaps also a trust -- to control the transfer of the balance of your property. A will is a written document that specifies the who, the when, and the how of the transfer of your property when you die, along with other important provisions, such as the naming of your executor and the guardian of your minor children. A person who dies without a will is said to have died intestate. Each state has laws of intestacy which govern how property passes in such situations. By dying without a will, you could cause your family an unnecessary amount of inconvenience regardless of your age or level of income. A trust is a legal device that allows you to transfer your property to a trustee, who will manage it for the benefit of the person(s) you designate. The trustee can be the individual creating the trust or a neutral third party.

How Much Do You Own?

How much do you own?

It seems like a simple question, but often it is not. When many people think of what they own -- their estate -- they think about things. The house. The car. The computer. The diamond necklace.

These things are all part of your estate. But don't forget to consider all the other assets that might belong to you or your estate: The funds in your 401(k) retirement plan. The stock certificate in your safe deposit box. The life insurance policy that you took out four years ago.

In addition to identifying the assets in your estate, you must also identify and understand the amount or percentage of each asset that you own and the way in which the property is titled. The laws of the state in which you reside when you acquire the property may affect your ownership in an asset.

Before you can think about how you would like to dispose of your property after you die, you must start by identifying it -- what it is, where it is, and how much it is worth. One good way to understand the scope of your estate is with our Recordkeeper. The Recordkeeper is a checklist that will help you prepare a centralized record of all the assets you might own.

After you have a basic understanding of the different ways property can be transferred and you start to get a sense of how much you own, you can begin to address your estate planning needs. We recommend that you apply a disciplined process to estate planning, rather than simply focusing on one specific aspect or problem.