Leaving A Legacy: Understanding Wealth Transfer

By Corrina Judd, Esq., Vice President & Estate Officer

Have you ever wondered how your resources might benefit others after you’re gone? Although most of us don’t enjoy dwelling on the knowledge that we won’t be around forever, it can be deeply gratifying to consider how our resources could benefit others when we’re no longer here. A well drafted estate plan is crucial to ensuring that your post-mortem wishes are accomplished. Yet without an understanding of how different types of property are transferred at death, even the best estate planning documents may not achieve the intended result.

Assets fall into two broad categories following a death: probate property and non-probate property. Any asset titled in a decedent’s sole name is considered probate property. Common examples of probate property include bank accounts, vehicles and real estate titled in the individual’s name. At death, the disposition of probate property is governed by the terms of one of the most vital estate planning tools, a Last Will and Testament. It’s important to note however that a Last Will and Testament does not control the disposition of any non-probate property.

Assets that are distributed at death based upon how an account is titled or how a beneficiary is designated are considered non-probate assets. Non-probate assets may include jointly titled accounts and real estate, accounts with a beneficiary designated and assets titled in the name of a Trust. (For more information about the difference between Wills and Trusts, check out our blog post here.)

Many people fail to understand that non-probate assets will pass automatically to the designated beneficiary or surviving joint owner regardless of what the terms of a Will or Trust may dictate. For instance, say that Bob owns a joint checking account at The National Bank of Indianapolis with his oldest daughter Jessica. Bob subsequently passes away. Bob’s Will states that his assets are to be distributed equally to all three of his children, Jessica, James and Jennifer. What Bob didn’t realize was that the checking account will automatically pass to just one person - the surviving joint owner on the account, Jessica. The terms of Bob’s Will won’t control the distribution of the checking account because the checking account was titled jointly.

The same holds true for any account that designates a beneficiary – the beneficiary designation will take precedence over the terms of any Will or Trust. For example, if Bob owned a life insurance policy and designated his son James as the beneficiary, the proceeds from the life insurance policy will pass directly to James at Bob’s death. Jessica and Jennifer would not receive any of the life insurance proceeds even though they are listed as beneficiaries in Bob’s Will.

Assets titled in the name of a Trust are also considered non-probate property. Any assets titled in the name of a Trust pass pursuant to the terms of the Trust document at the death of the Grantor (i.e. the creator of the Trust). In Bob’s case, if he had created a Trust during his lifetime, he could have retitled his checking account in the name of his Trust. Then at Bob’s death, the distribution of the funds in the checking account would’ve been governed by the terms of the Trust. Like jointly owned property and beneficiary-designated property, assets in a Trust are not governed by the terms of a Last Will and Testament.

With a qualified estate planning attorney as a guide, it’s possible to benefit others in a myriad of ways. The Wealth Management team at The National Bank of Indianapolis provides highly personalized services in the areas of estate settlement and personal trust administration. Contact us to discuss how we can partner with you and your trusted advisors in providing these services for you and your loved ones.

Learn more about Personal Trusts and Estates services from The National Bank of Indianapolis here.