A Will permits you to define who will receive your property when you die. The distribution of your assets involves several considerations. For example, do all of your assets pass according to the terms of your Will? How do you handle the distribution of your personal effects in your Will? Can you make specific gifts of cash or other property to loved ones? Who receives everything left over after you make specific gifts in your Will? What happens if all of the immediate members of your family die before you or at the same time as you? What is an Executor? Here we will discuss each of these issues.
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 these categories will pass according to the terms of your Will when you die. These assets are commonly referred to as “probate assets.”
A Will is important if you wish to have any control over the administration and distribution of your estate. If you die without a Will, you die “intestate” and the distribution of your estate is determined by the laws of “intestate succession.” These rules establish a hierarchy of family relationships in which property passes to your “next of kin” as defined by the law of the state where you reside at the time of your death. A Will allows you to designate the person who will be in charge of the administration of your estate when you pass away. If you have a Will, this person or entity is called an “Executor.” You can designate a primary Executor as well as an alternate Executor if the primary Executor cannot serve.
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 items. 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 to your beneficiaries 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 or 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.
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 will 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.
Guardian For Children
If you have children under the age of 18, one of the most important provisions of your Will is the appointment of a guardian for your minor children. Without a Will, the court determines the custody and guardianship of minor children when both parents pass away. Though the court possesses the ultimate authority to determine the guardian of a minor child, the court will usually defer to the wishes of the child’s parents as expressed in their Wills.
If you establish a trust for your children, the designated trustee will be responsible for the management and supervision of the trust property. The person designated as guardian for your children may be different from the person designated as the trustee of the children’s trust.