Are there any properties not distributed under a Will?
Estate planning is the process of identifying how and to whom your assets should be distributed after your death. The process, best managed with the advice and guidance of an experienced estate lawyer, means creating a strategy to distribute your wealth as you wish without confusion, contention (hopefully), or an unnecessary tax burden on any of the recipients.
Some assets may pass to your beneficiaries through your will, but some can transfer ownership by way of a specific beneficiary designation or co-ownership.
What Assets Will Not Be Covered in Your Will
In New Jersey, your will does not need to cover assets that are already designated to pass to specified beneficiaries.
These may include insurance policies, payable-on-death bank accounts, and certain shared or co-owned assets. Those items will not be subject to the probate process and automatically transfer to the named individual(s) at the time of your passing.
Examples of assets that will not be covered by your will are:
- Joint Tenancy Property with Right of Survivorship: Assets held in joint tenancy or community property will pass to the joint owner in the event of your death. The property would go to someone else only if you and your joint tenant died simultaneously. In this instance, a will can address the disposition of the joint property with a common disaster clause.
- Life Insurance Policies: One essential element of any life insurance policy is the designation of your primary and secondary beneficiaries, telling the insurance company who will receive the benefits. Should you and the primary beneficiary happen to die at the same time, the insurance benefit will pass to secondary beneficiaries. As time passes, keeping your beneficiary designations current is extremely important.
- Annuities: You can establish your beneficiary when you set up an annuity with an insurance company. While you are living, you can change the designation whenever you choose. Note that any gains in the annuity account will be subject to taxation upon transfer in most instances.
- Property in a Trust: Because trusts name specific beneficiaries, these are not to be redistributed through your will. And, setting up a Living Trust can be an excellent way to avoid the probate process which can be important in certain states, but not all. When you die, the property in the trust will automatically pass to the named beneficiaries and managed by a specified trustee.
- IRAs, Pension Plans, 401k: When you set up a retirement account of any kind, the financial institution holding the funds require you to list primary and secondary beneficiaries. Beneficiaries of retirement money from IRA and 401k accounts will be liable for paying the income taxes on these tax-deferred accounts only at the time they choose to withdraw the funds.
- Stocks and Bonds: Investors may be able to name beneficiaries of stocks, bonds, or mutual fund accounts when they open investment accounts with any financial institution or brokerage. In some instances, it may be advisable to establish individual accounts if you have multiple beneficiaries. In this way, the liquidation does not become contentious or complicated.
- U.S. Savings Bonds can even list a payable-on-death beneficiary on the face of the paper bond. Or if these are held electronically at the U.S. Treasury, you can add or change beneficiaries at any time by going online to your account.
Transferable or payable-upon-death designees, as well as beneficiaries of other financial instruments, will usually need to submit original, certified death certificates, plus official identification, to transfer ownership. One of the major challenges with payable on death accounts is that they may be subject to inheritance tax and, yet the beneficiary can obtain the money without paying the tax. Before naming a payable on death or transfer on death beneficiary always speak with an estate planning attorney.
Contact the Law Office of Nicholas A. Giuditta III
Your will is an integral part of your estate planning. Even though many of your assets may be handled outside of the probate process, certain elements should be included in a comprehensive Will to ensure a smooth transition once you are gone.
In Westfield NJ, Nicholas Giuditta III has over three decades of professional experience in managing each aspect of estate planning.