How will my assets transfer upon my death?
Without proper planning, an estate will generally be probated under the intestacy laws, which includes a predetermined process and plan for distribution created by the legislature. Intestacy generally means the estate of a person who dies without a valid Will. As an alternate, there are generally three methods by which an individual can predetermine how assets may transfer upon death.
Many assets, including retirement accounts, life insurance and bank accounts can be transferred via a beneficiary designation. This method presents a pretty seamless transition and generally does not involve the Courts, probate, or much process. In general terms, a beneficiary designation is a contract entered into by owner of the account, and the custodian (usually the financial institution) whereby the owner has directed how the assets transfer on death.
There are many types of beneficiary designations (joint with right of survivorship, pay on death, transfer on death, etc.) and the method of setup and process involved in transfer vary to some degree.
One of the primary things to keep in mind is that beneficiary designations should be set up in conjunction with a comprehensive estate plan. More often than not, when terms are inconsistent, a beneficiary designation trumps the terms of a Will or Trust.
There are several requirements for the execution of a valid Will. In order to execute a Will the individual (“Testator”) must have testamentary capacity. Among other requirements, the Will must be in the proper form, witnessed (with testimony from witnesses) and executed by the Testator. While the process may seem intimidating on its face, it is relatively simple when handled by a qualified professional. In most cases, an attorney will meet with the client, generate drafts, and then tweak the documents as needed to get them to final form. For a couple, this can usually be done for around $800.
Once a Will is executed there is very little, if any, maintenance. Upon death of the Testator, the Will is admitted for probate and a Personal Representative (executor) is appointed (usually the individual nominated by the person who executed the Will). Probate is a judicial procedure by which a Will is proved valid and the estate is then administered.
More often than not, an attorney can take care of most of this process without the client ever appearing in Court. Once appointed, the Personal Representative is charged with taking possession of the assets, arranging for the satisfaction of liabilities, and distributions to the heirs.
Washington has a very user friendly probate process and while some action is required, the process is generally not overly time consuming or expensive.
For Estate planning purposes, the most commonly used Trust is a Revocable Living Trust. With a Trust, the trustmaker (Trustor) places all of his or her assets into the Trust, and directs what should happen with those assets upon death. There is some maintenance and legwork involved at the onset and during life of the Trustor as virtually all of the assets of the Trustor need to be placed (or retitled) into the Trust. Upon death, the Successor Trustee (usually predetermined by the Trustor), performs many of the same functions as an Executor, just under different authority and without any judicial process or probate.
Wills and Trusts generally are used to accomplish the same primary tasks (satisfaction of liabilities and transfer of assets). However, the two methods are distinct and somewhat dissimilar as to process. For the most part, any planning advantages (think “tax shelter,” “minor trusts,” “charitable giving, etc.) can be accomplished in a similar manner with a Will or a Trust. There are upsides and downsides to each method, and which to choose is most often guided by your individual situation and needs. Lastly, there are other relatively simple documents (Power of Attorney, Health Care Directive, Community Property Agreement) that are most often essential to a comprehensive estate plan, and can be created at little,or no cost.
When determining your estate plan, it is essential that you talk to an attorney from Rodgers Kee Card & Strophy, P.S. We are dedicated to helping our clients make the right decisions that will best serve their family, based upon their unique situation. We are experienced in all areas of estate planning, including beneficiary designations, Wills, Trusts, guardianships, and Credit Shelter provisions.