People must transfer property to others when they die.

All humans come into this world with nothing of their own.

Toys, clothes, and food are provided to them by their parents or gifted by other family and friends.

As individuals go through life, they may purchase a vehicle, a home, furniture, jewelry, and art.

Bank accounts, investments, and digital assets are also commonly acquired.

When a person dies, what was personally owned must be given to others.

Before death, people must arrange to transfer property after death.

This is done through estate planning.

To effectively transfer property, one should understand the various estate planning tools and how they work to accomplish specific goals in estate administration, whether through direct transfer or probate.

Many options are available to transfer property to loved ones.

What is Probate, and Why Avoid It?

Probate is neither inherently evil nor designed to make the lives of surviving loved ones particularly miserable.

Instead, it was created to provide structure, order, and oversight to pay debts to creditors and distribute assets to heirs.

Probate involves the court authenticating the decedent's last will and testament and overseeing the estate's administration.

What happens if there is no existing last will or the last will is deemed invalid?

In this instance, the person will be considered to have died intestate.

What does intestacy mean?

When a person dies intestate, the state laws governing the identification of heirs and the distribution of assets will be applied to transfer the decedent's property.

Yikes!

Who might the state consider next-of-kin for determining who inherits?

The definition differs from state to state.

Those residing in Overland Park, Kansas, or Kansas City, Missouri, could have different governing rules than those in Los Angeles, California.

Generally, the state would grant property to the surviving spouse, biological and adopted children, parents, and siblings of the decedent.

If none of these relations is identified, then grandparents, uncles, aunts, nephews, nieces, cousins, and extended family members could inherit.

Those wanting to risk not having a last will should understand how their state's specific laws would transfer property.

For example, some states would treat half-siblings and full-siblings equally, and others would not.

Although a proper last will may provide an efficient property transfer through probate, the process will still cost time and money.

Estate planning to avoid probate may reduce the time, stress, and money associated with court involvement.

What is the Role of a Will in Estate Planning?

The last will is not a probate avoidance tool.

Instead, it is a probate governance tool.

A last will appoints an executor for the estate, nominates guardians for minor children, and outlines your wishes to distribute assets to heirs.

Because the probate court will use this document to oversee your estate administration, you should regularly review and update your last will as life circumstances and wishes change.

Why is Designating Beneficiaries Important?

Some accounts and property are distributed according to beneficiary designations.

These commonly include retirement accounts, life insurance policies, investment accounts, and savings accounts.

Payable on Death (POD) designations may also be available for credit union and bank accounts.

Although bank and credit union accounts can also be jointly owned, you should be cautious and speak with your financial professionals because doing so may cause tax issues.

When accounts have beneficiary designations and payable on death designations, the assets are transferred directly to the designated heirs outside of probate.

These assets are not governed by the last will when a beneficiary has been designated on the account.

For these reasons, you must review and update these regularly to ensure they align with your comprehensive estate planning goals.

What Authority Do Living Trusts Have?

A living trust is an estate planning tool for managing assets during life and after death.

A living trust is a legal document where assets placed into the trust are governed by the terms of the trust to benefit you during your life and transfer assets to designated beneficiaries after your death.

The trust designates the trustee to manage the trust according to its terms.

With a living trust, the grantor can also serve as the trustee.

Because revocable living trusts provide flexibility in making changes or terminating a trust, they are a popular and appealing estate planning tool for many.

Assets used to fund the trust will be distributed outside of probate, offering greater privacy.

In some instances, living trusts can even reduce estate taxes.

The complexity of this tool requires an experienced estate planning attorney to create the document.

Should You Transfer Property While You Are Living?

Like most estate planning questions, the answer depends on specific goals, circumstances, and property type.

Are you considering gifting your house or primary residence?

If you transfer this asset to an adult child and they eventually sell the property, they could owe a significant capital gains tax bill.

By waiting to transfer real estate as an inheritance after death, the property value would receive a stepped-up basis and reduce or avoid capital gains taxes if sold.

A living trust can also transfer property ownership when the assets are titled to the trust while the grantor is still alive.

What are Joint Ownership and Transfer on Death Deeds?

Although living trusts and beneficiary designations are effective estate planning tools, other options can be used to bypass probate in the transfer of certain assets after death.

According to a recent NextAvenue.org article titled "3 Ways to Help Your Heirs Avoid Probate," smaller estates may benefit from using transfer on death deeds or joint ownership.

When a property is jointly owned with a right of survivorship, both individuals own the property while both are alive, with the surviving owner assuming full ownership of the asset after the death of the other owner.

A transfer on death deed functions similarly to a beneficiary designation.

These deeds are a means of transferring real property directly to a named beneficiary after your death.

What Can be Done with Digital Assets and Online Accounts?

Much of life is managed digitally in this modern era.

This is not limited to social media accounts.

Restaurants, banks, and airlines have their own apps and rewards programs.

Take time to organize and manage usernames and passwords for these digital assets and accounts.

Your heirs will need login information and digital instructions to access your digital assets.

Should I Convert Paper Treasury Bonds?

Another article from NextAvenue.org titled "6 Ways to Save Your Heirs from a Painful Probate" addresses the transfer of this specific asset.

Because many banks no longer cash U.S. Treasury bonds and navigating the TreasuryDirect website can be challenging, it may be wise to convert paper bonds to electronic holdings.

Doing so can make redemption easier for heirs.

Organization is Key to the Transfer of Property.

Identification information and financial documents are necessary for executors to manage your affairs when you have died.

You should gather and organize your insurance policies, personal identification documents, and estate planning papers and store them in a secure yet accessible location.

Do not store your estate planning documents in your bank safe deposit box because your loved ones may need the same documents to access the box.

Yikes!

Inform your agent and loved ones of the location of these documents so they can quickly find what they need to manage your estate.

Prepare for Financial and Medical Emergencies.

If you do not have an incapacity plan in place, you could place your estate planning at risk.

You should create legal documents like an advance health care directive (i.e., a health care treatment directive and a durable power of attorney for health care decisions) and a general durable power of attorney for financial decisions to describe your wishes and designate individuals to manage your affairs should you become incapacitated.

Document Your Wishes for Burial.

If you have strong preferences for cremation or burial, put these in writing.

Doing so prevents loved ones from guessing what you would want or arguing over their personal preferences.

Document these details if you have specific wishes for a funeral or memorial service.

Work with an Experienced Estate Planning Attorney to Transfer Property.

While you are an expert on your own life, estate planning attorneys are experts in their field.

By combining your knowledge, you can create a personalized plan to transfer property and prepare for incapacity in alignment with state and federal laws.

What are the Key Action Steps?

You should create a last will if you do not currently have one.

Review and update beneficiary designations on certain assets like retirement accounts and life insurance policies.

Discuss using a living trust or other techniques if your estate planning goals include probate avoidance.

Prepare your powers of attorney for incapacity planning.

Convert paper investments into electronic formats and document wishes for burial.

Finally, outline and organize digital asset information and legal documents so heirs and executors can access them.

Taking action now is the best way to transfer property efficiently when you die.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between the Law Offices of Kyle E. Krull, P.A., and the reader.