March 21st, 2016

How to Ensure My Assets Are Distributed Properly Upon My Death

You may assume that by naming a spouse, children, or other loved ones in your will that those named will receive all of your assets following your death. However, that is not the case. Your will does not control the disposition of all of your assets following your death.  In other words, not everything you own will automatically go through probate (the legal process by which a will is filed with the court and an executor appointed). Certain assets that are controlled by your will are deemed “probate assets”.  Probate assets are those you own, that are in your name alone, and that do not have a beneficiary designation. These types of assets typically include bank accounts, houses or other real estate, and vehicles. In other words, if your name is the only name on title (or the account) and there are no named beneficiaries for that asset, upon your death, your will then controls the disposition of those assets. Further, only after the filing of the Will and the issuance of a short certificate from the Court approving the executor in your will or administrator (where there is no will) can the assets be transferred.

However, following your death, the disposition of many assets is not controlled by the terms of your will and those assets are transferred after your death, based upon a proper beneficiary designation. Those assets do not go through probate and are called “non-probate assets”.  Such assets include jointly-owned assets transferred to a surviving owner, assets with a valid beneficiary designation, or assets that are held in trust (if properly titled).  Examples of non-probate assets include life insurance policies, IRAs, 401(k)s, and other retirement accounts. These assets typically allow you to name a beneficiary. Accordingly, when you die, those assets will be paid directly to the person you have named as beneficiary regardless of what your will may say.

Keep in mind that both probate and non-probate assets are typically subject to Pennsylvania Inheritance Tax (and may even be subject to income tax by the recipients). An appropriate and properly completed Inheritance Tax Return must be prepared and filed regarding all of your taxable assets, probate and non- probate assets alike (with the exception of life insurance proceeds which presently are not taxable for Pennsylvania inheritance tax purposes).

Accordingly, not only will Gross McGinley prepare appropriate estate planning documents such as a Will, Durable Power of Attorney, and Health Care Power of Attorney/Living Will, but we will review your “non-probate assets” to ensure your beneficiary designations are in place and that the beneficiaries listed are up-to-date, the documents reflect your intentions, and all is proper to avoid or limit taxes.

Thomas A. Capehart has 25 years of experience counseling individuals on estate planning matters and ensuring their needs and goals are met.