Many people want to know the best way to transfer assets at death. It is important to understand that assets can be transferred in different ways depending on how they are titled. The assets that need to be distributed at death often include real property, vehicles, bank accounts, retirement accounts, life insurance and stocks and bonds.
The personal representative or another trusted person often needs to distribute a loved one’s assets after that person has passed away. For example, Bob came to see me a couple of weeks after his mother, Sally, passed away. Sally had a will that left everything equally to her three children. Bob’s father, John, had passed away two years earlier. At Sally’s death, she owned a house, a checking account, an investment account, a vehicle, and an IRA. Bob is named as the personal representative of Sally’s estate in her will.
In order to transfer the house which was owned by Sally to her children, Bob would need to file a petition for probate and appointment of personal representative with the court. If there was a mortgage against the property, the property would likely be sold to pay the mortgage. The proceeds, after the costs of the probate, payment to creditors and costs of sale, would be distributed to the children.
Sally had a checking account. About one year before she passed away she added Bob to the account as a co-owner to assist her with paying her bills. At her death, Bob became the owner of that account. He may choose to share the money in the checking account with his siblings but he is not obligated to do so. Sometimes this is where the deceased person’s intent is not carried out. Sally may not have realized that when she added Bob to her account that he would receive the funds in that account at her death. If Sally was the sole owner of the account at her death, the account would have been disbursed to her beneficiaries if she had designated a POD (payable on death beneficiary) for her accounts
Sally has an investment account with Ann, her youngest child, designated as the TOD (transfer on death) beneficiary. Therefore, all of the assets in Sally’s investment account will be paid directly to Ann. Usually the brokerage firm will require that the beneficiary submit a death certificate and complete a form regarding how they want to assets disbursed. It is not clear to Bob if Sally intended that Ann only received the funds from the investment account or whether she just thought it would be easier than naming all three of the children.
Sally’s car was owned in her name alone. If there are no other assets subject to probate other than Sally’s vehicle, the children could file an inheritance affidavit with the Department of Motor Vehicles and get the title to the vehicle transferred to them without filing a probate. If there is a probate opened, then the vehicle would be sold or distributed a part of the probate.
Sally owned a retirement account which designated all three children as beneficiaries of her account. Therefore that asset will be distributed in equal shares to the children. Each child can decide if he or she wants to cash out the retirement or delay their distributions.
Sally did not have a revocable trust. If Sally had a revocable trust, Bob could have avoided probate and transferred the assets within the trust to her beneficiaries. However, Sally would have had to transfer her assets to the trust while she was living. Most assets except for retirement accounts and life insurance can be transferred to a revocable trust. At Sally’s death, the successor trustee that she nominated in her trust would transfer the assets to her beneficiaries without probate.
If Sally’s house was valued at less than $200,000 and her personal property was valued at less than $75,000, her estate would have qualified for the small estate proceeding, Oregon’s simplified probate process, which is faster and less expensive than a full probate.
Bob will need to file a probate with the court to transfer Sally’s house, her vehicle and any accounts without designated beneficiaries to the three children. Bob is designated as the personal representative under Sally’s will. Therefore, after he is appointed by the court to act as personal representative, he would collect the estate assets, file an inventory with the court, open an estate account, and pay any outstanding debts of the deceased. Once the required time periods have run and notice is served on the required people, Bob would request that the court authorize him to distribute Sally’s assets according to the terms of her will. Probate typically takes longer and is more costly than many of the options described above. However, the benefits of probate are that it offers court supervision and creditor claims are cut off after the prescribed notice is given and time periods are completed.
Therefore, it is important to understand how assets will be transferred at death and to ensure that the transfer is consistent with one’s overall estate plan.
“This advisory is published by Bryant, Lovlien & Jarvis, PC to provide a summary of significant developments to our clients and the community. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.”