If you’re like most people, you’re concerned about making sure your money goes where you want it to when you die, but do you know how to make that happen? Have you thought about not only your finances, but also the money you have invested in your possessions, property, and other assets?
Making Sure Your Money Goes Where You Want It To – Know Your Options
Your assets can be transferred in five different ways at the end of your life, and by understanding each of them, you can begin deciding how you want to plan your estate.
Five Ways Money and Other Assets Are Transferred:
Last Will and Testament
A will is a legally enforceable document that states how you wish your assets and property to be distributed at your death, and who will receive custody of your minor children (if you have any). It’s sometimes also referred to as a “Last Will and Testament.”
At the time of your death, the Will is filed with the local court and enforced through a system called probate.
(Related: Need more information about probate? Read our article, A Beginner’s Guide to the Virginia Probate Process.)
Creating a will is very important and a basic first step in estate planning, and everyone should have one. But some finances and assets will not be controlled by a will.
A will does not control assets owned by trusts, insurance policies, and retirement accounts with beneficiary designations, other financial accounts with a payable-on-death designation, and assets owned jointly with the right of survivorship (see “Survivorship” section below!). It is important to make sure you have a plan for these assets as well.
(Related: When and How to Write a Last Will and Testament)
Trusts
Setting up a trust is another way to transfer assets when you die, and one that we often recommend along with a will. Like a will, a trust allows you to determine what will happen to your assets after you die. But unlike a will, it’s very flexible and private. A trust allows you to transfer assets to it before you die and can continue to operate after you’ve passed, giving you the ability to control your assets long after your death.
Beneficiary Designations
Certain investments, bank accounts, and insurance policies can have beneficiary designations that provide for someone you name to receive that account or policy when you pass.
In other words, if you place a beneficiary designation on an account, that account will go to the named beneficiary regardless of what your will says and without going through the probate process.
These designations are frequently used on retirement accounts and life insurance policies, but they are available on most other financial accounts.
Survivorship
Property can also be transferred automatically when you die if you own it jointly with someone else, with the right of survivorship.
If two people own an asset with the right of survivorship, when the first person passes, the second party automatically owns it entirely.
For example, if a husband and wife are joint owners with the right of survivorship of a house and the husband dies, the wife automatically becomes the owner of the entire house. Again, this happens regardless of what the will or trust says and without the necessity of going through probate. While ownership is automatic, there are frequently steps that need to be taken to change the titles (either with the Department of Motor Vehicles or the land records).
Intestacy
Intestacy is a default plan established by the Code of Virginia concerning what will happen to your assets if they are not governed by any of the methods above.
Because many people don’t have a plan in place for their assets when they die, Virginia has to have a process in place to distribute their possessions.
While the intestacy rules often serve a valuable function, it is not a good idea to rely on them, and most people would rather be in charge of deciding where their money goes than leave it up to the government. This means taking advantage of one or more of the other options we just talked about.
We Know, It’s a Lot to Process!
Now you’ve got an aerial view of the ways your money and other assets can be distributed when you die. While it may all seem overwhelming, don’t stress! We’re here to help. Check out our website for more resources on estate planning or contact us for a free consultation.
