Written by: There are three ways your property passes to another person in the event of your death. I use the analogy that your property will travel along one of three roads from you to some other person.
The first road is what I refer to as the Road of Law. This law, called intestate succession, applies when a person dies without leaving a will naming a beneficiary to the property. In essence, the law fills the legal void created by the deceased. Under the law, the property passes to a person’s closest heir, typically his or her spouse. If the deceased had children of his or her own, the property is divided between the spouse and the biological children.
The second road potentially taken is the Road of Probate. This law, known as testate succession, is in effect when a person has directed — by his or her will — the person(s) who are to inherit property as part of the estate, which often becomes part of probate. Probate is the process whereby the court oversees the passing of one’s property according to the provisions of a will. In the case of inconsistencies, the Road of Probate presides over the Road of the Law.
The third road is the Road of the Will Substitute. Property traveling this road passes to one or more persons via certain will legal documents which are not wills, but nevertheless are recognized by the law as directing who receives property at death. It is important to take into consideration whether one’s property is subject to a will substitute, since the will substitute takes precedent when it is inconsistent with either a person’s will or the law. These will substitutes take one of three forms.
The first will substitutes are deeds. The deed essentially controls who the owner of the real estate will be following an owner’s death. A deed to real estate can have more than one person as the owner with rights of survivorship. When one such owner of the real estate dies, the survivor owns the property. Similarly, a deed to real estate can be titled to direct to whom the property shall pass such as a “transfer on death” provision or a “remainder interest” following a life estate in property.
The second will substitutes are financial contracts. Such contracts include bank accounts, brokerage accounts, IRA and other retirement accounts, annuities and life insurance contracts. Like deeds, these contracts have the ability to name joint owners with rights of survivorship, or pay or transfer provisions directing to whom the property shall pass upon death.
The third documents are trusts. Through a trust, a person can direct who inherits property in the same manner as he or she could do in a will. The main difference between a trust and will is the trust does not require court oversight concerning the disposition of the property, as is typically the case where property passes via a will.