How Assets Transfer When a Person Dies

When a person dies their assets generally transfer to a new owner in one of four ways as follows: Joint Owner with Survivorship Rights; Payable-On-Death/Transfer-On-Death/Beneficiary Designation (“Beneficiary Designation”); via Probate; or via a transfer to a Trust.

If an asset is owned with a joint owner who has survivorship rights to said asset, the surviving joint owner(s) automatically owns the asset free from the probate process upon the other joint owner’s death. Common assets that have joint owners with survivorship rights are: bank accounts; real property and investment accounts.

If an asset has a Beneficiary Designation, the named person(s) to receive the asset will be able to claim said asset free from the probate process upon the owner’s death. Common assets that have Beneficiary Designations are: bank accounts; retirement accounts; life insurance; annuities; real property; corporate interests and investment accounts.

Probate is a circuit court proceeding in which assets are transferred to new owners upon a person’s death. All assets that are not transferred by some other means (to avoid probate) are subjected to probate administration and thus subject to the terms of a person’s Will (if they have one). If you die without a Will and have assets that are subject to probate administration, any interested person can petition the court in order to distribute your assets according to state laws. I view a Last Will and Testament (more commonly referred to as a “Will”) as a necessary estate planning document for most people but I also see the Will as a safety net to catch assets that a person has failed to transfer via other methods such as joint ownership with survivorship rights, Beneficiary Designation, or by a transfer to a trust. There is a common misconception that the only estate planning document needed is a Will, however, a Will alone (without proper planning and understanding of how the Will operates) is not likely to avoid issues following a person’s death.

If an asset has been properly transferred into a Trust during a person’s lifetime or by a Beneficiary Designation, the Trust’s terms shall govern the administration and distribution of said asset until the Trust has fulfilled its purposes and the asset will avoid the probate process. The depth of this article will only allow for discussion on the most common type of trust which is known as a revocable trust or a living trust (“Revocable Trust”), However, many types of trusts exist for many different purposes.

A Revocable Trust is a legal document that is established during a person’s lifetime which usually directs that the trust’s assets and income are to be used for the person’s benefit during their lifetime and also designates beneficiaries to receive said assets after the person’s death. A Revocable Trust, like a Will, can be amended at any time by the creator of the trust who is known as the “Grantor” as long as he is living and maintains legal capacity. The person in charge of the trust with legal authority to manage the trust is known as the trustee (“Trustee”). The Trustee administers the trust for the benefit of the Revocable Trust’s named beneficiaries. Usually, the

Trustee is the Grantor during his lifetime and then a successor trustee is named to take over the trustee role upon the Grantor’s death.

After creating a Revocable Trust, the Grantor then transfers many of his assets to the Revocable Trust during his lifetime. The Grantor can add or withdraw assets from and to his Revocable Trust at any time during his lifetime while he maintains capacity. When the Grantor dies, a Revocable Trust becomes irrevocable and the then serving trustee and trust beneficiaries may not alter any of the trust’s provisions. A Revocable Trust will avoid probate upon the Grantor’s death for all assets that have been transferred to the trust. Probate is avoided because Revocable Trust assets are not titled in the name of Grantor at the time of death and therefore the property is not part of a probate process. It is very important to fund a Revocable Trust as failure to properly fund the trust will provide little or no benefit to the Grantor.

Whenever configuring an estate plan, it is important to meet and discuss with a qualified estate planning and probate attorney where you map out and plan what will happen to each of your assets upon your death to ensure that your estate planning goals are accomplished at the time of death.

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Kevin Albaum

Associate at Clark, Campbell, Lancaster & Munson, P.A.

Kevin Albaum was born and raised in Tarpon Springs, Florida. He grew up spending a lot of time on the water either boating, fishing, wakeboarding, or jetskiing. Kevin earned his bachelor’s degree at Florida State University where he competed for FSU’s mock trial team across the country. Immediately upon graduation, he enrolled at Stetson University’s College of Law in Gulfport, Florida due to their specialty program in elder law and his passion for that specific field of the law.

Kevin moved to Lakeland, Florida to join Clark, Campbell, Lancaster, and Munson where he practices in the areas of: elder law, guardianship, estate planning, trust administration, and Medicaid. Since moving to Lakeland, he has become involved with the Alzheimer’s Association Walk Committee, EMERGE Lakeland, and VISTE.