Have you ever wondered what happens to a person’s assets when they pass away? Just about everyone knows about a Will, and the fact that it includes instructions on how to dispose of a decedent’s assets upon his or her death. But did you know there are other ways of transferring assets to your loved ones upon your death? You can easily remember three methods by recognizing the acronym C.O.P. – Contract, Operation of Law, and Probate.
“C” – Contract
The first method of transferring assets upon the owner’s death is through the use of various contracts. This is an arrangement to have money and assets transferred upon the asset owner’s death to the people previously designated by the asset owner. This form of transferring assets is very common, and includes the following arrangements:
- Life Insurance Policies;
- Individual Retirement Accounts;
- Buy-Sell Agreements.
One benefit to using contractual arrangements for transferring assets is that the right of the beneficiary to receive the assets in question exists at the moment of the owner’s death. When executed properly, (barring any extraordinary complications) the transfer can occur rapidly with minimal effort on the part of the beneficiaries. Additionally, the use of a contractual arrangement, such as a Trust, allows you the peace of mind of knowing that, regardless of an incapacitating illness later in the owner’s life, his or her wishes will be followed upon the owner’s death.
The key to using contracts to swiftly transfer assets upon the owner’s death is to plan far enough in advance to fully reap its benefits. This is especially true of contractual arrangements such as Life Insurance Policies and Annuities, which can become financially infeasible, or even completely unattainable, the older the applicant becomes. Additionally, certain types of contractual arrangements come under close scrutiny if they occur near to the asset owner’s death.
“O” – Operation of Law
A second method of transferring assets upon the asset owner’s death is by operation of law. Generally, this technique is applicable to situations where the asset owner holds title to an asset with another person. Forms of holding assets include:
- Joint Tenancy with Rights of Survivorship
- Tenancy by the Entirety
- Community Property with Rights of Survivorship
- Life Estates
The “survivorship” aspect of this type of asset ownership transfers full ownership immediately upon the co-owner’s (or life tenant’s) death to the remaining owner(s) (or remainder interest holder).
This technique is different from the contract method of asset transfer, as the beneficiary under a contract generally does not have an ownership interest in the asset in question until the owner’s death. Conversely, under a transfer by operation of law, the recipient becomes a co-owner of the asset upon taking title to the assets.
“P” – Probate
A third way in which assets are transferred upon the asset owner’s death is through Probate. This is the process through which title is changed from the decedent’s name into the new owner’s name. Probate, (depending upon the state in which the asset owner resides and where property is located) can be an expensive and time-consuming process. Additionally, probate is a public court proceeding, thereby allowing anyone to know your personal details and financial holdings.
Probate is mandated if you die without a Will. The court must determine who is to receive your assets as prescribed by state law. However, what many people do not realize is that Probate is also required if you die with a Will. “Probate” means “to prove a Will.” Nevertheless, if you have disposed of your assets through an alternate means of transfer as discussed above, (“Contract” and “Operation of Law”), the process can be expedited in many states.
The Decision is Yours
The bottom line is that you do have a choice – you can dictate how your assets are transferred upon your death. Knowing this fact gives you an advantage over many people, but you must use that knowledge to benefit yourself and your family. Consult with a qualified attorney specializing in estate planning to discuss which methods are appropriate for your particular circumstances.
Mr. Ronald “Chip” Morrison, Jr. is a Board-Certified Specialist in Estate Planning and Administration by Louisiana Board of Legal Specialization and a member of the American Academy of Estate Planning Attorneys. He has been engaged in Louisiana trusts and estate law for the last 16 years and has experience in both simple and complex estate matters. For more information or to attend an upcoming seminar, please call our office at (504) 831-2348 or contact us through our website.