The Five Ways Assets are Transferred to Heirs After Someone Dies

When someone dies, the decedent’s assets must all be identified by ownership, beneficiary designation, and value to determine (1) who inherits, and (2) the method necessary to distribute the assets to the heirs. In this post, we will outline the five (5) methods by which the decedent’s accounts and property are distributed to their heirs.

By law, assets are transferred through these five (5) methods:

  1. Joint Ownership
  2. Beneficiary Designation
  3. Trust
  4. Last Will and Testament
  5. Intestate Law

The method used depends upon how each account or parcel of real property is titled and, in some cases, the value at date of death.

 

Joint Ownership

When a financial account (e.g., checking, savings, CD, brokerage account) is jointly owned the share owed by the decedent is presumably then owned by the surviving joint owner(s) on the account. When real property is titled to more than one owner, as joint tenants with rights of survivorship or community property with rights of survivorship, the interest of the deceased joint owner automatically conveys to the survivor(s). To complete the distribution, the death certificate must be given to the financial institution or, in the case of real property, recorded with the County Recorder’s office with an Affidavit of Death of Joint Owner.

Beneficiary Designation

If an account, policy, or retirement account has a beneficiary designation, the account or death benefit, as the case may be, will be distributed to the designated beneficiaries. Beneficiary designations are often made when a financial account, retirement account, or life insurance policy is established and may thereafter be updated by the owner of the account or policy. Each designated beneficiary will need to complete the claim paperwork provided by the financial institution or insurance company.

In Arizona, we also have a Beneficiary Deed which may be used to convey real property upon the owner’s death as well as the ADOT Beneficiary Designation form which may be used to convey ownership of motor vehicles upon the owner’s death.

Trust

In general, assets owned by a Trust on the Trustor’s date of death shall be distributed to the beneficiaries by the Trustee as set forth in the trust agreement, with no probate or court supervision required. The Trustee will handle the administration and beneficiaries are entitled to trust accountings.

Last Will and Testament*

The decedent’s Will sets forth the persons or entities that will inherit the estate assets (known as “devisees”) and nominates a Personal Representative to administer the estate.  Note, the “estate” assets are those assets that are not otherwise distributed by operation of joint ownership, beneficiary designation, or Trust. In other words, the “estate” assets are the leftovers not otherwise distributed by law.

 

Intestate Law*

If there is no Will in effect at time of death, the decedent’s “estate” assets will be distributed to their heirs under state law. Note, when an individual dies with no valid Will in effect, it is referred to as an intestate estate.

*In Arizona, when there is more than $100,000 in equity in real property or more than $75,000 in other assets to be distributed by Will or under Intestate Law, probate is required.  For smaller estates, the devisees or heirs may collect assets by Small Estate Affidavit.  If probate is required, the court appointed Personal Representative will handle the estate administration.  If no probate is required, the devisees or heirs will use a Small Estate Affidavit to directly collect the assets.

Case Study – Example

 

Let’ s say David Sr., a widower, died on January 1 and is survived by his 3 adult children, Destiny, David Jr., and Daniel.  At the time of David Sr’s death, he owned the following assets:

  1. Bank accounts jointly titled with daughter Destiny (value $5,000);
  2. Real Property and accounts titled to his Revocable Trust which designates his 3 children, in equal shares, as beneficiaries, and his son David Jr. as Trustee (valued at $1 million);
  3. Life Insurance policy with his 3 children named as beneficiaries, in equal shares (death benefit $100,000);
  4. Truck titled to him individually (value $20,000);
  5. One Parcel of Property in Northern Arizona titled to him individually (value $500,000);

Based upon the foregoing, Destiny is the presumed owner of the bank accounts, David Jr. will administer the Trust as Trustee and distribute the net Trust assets after payment of debts and expenses to the 3 children equally, each child will complete and submit their own claim forms to collect their 1/3 share of the life insurance death benefit, and a probate proceeding will be required to appoint David Jr. as Personal Representative (per David Sr.’s Will) to handle the truck and Northern Arizona real property (“estate assets”) via the Court probate proceeding. Note, had the Northern Arizona real property been titled to the Trust on David Sr.’s date of death no probate would be required as the truck could have been collected by Small Estate Affidavit.

With estate planning, you should always seek legal advice specific to your unique circumstances (e.g., family dynamics, needs or concerns regarding certain heirs, assets and liabilities, tax, and other considerations) in order to craft the best estate plan for you and those you care about. Likewise, if you are responsible for handling a loved one’s final affairs, you should always first seek legal advice to ensure you understand and comply with all your legal and fiduciary duties and responsibilities owed to both creditors and heirs.

We are here to help you, and your family. Call 480-922-1010 or email info@bivenslaw.com today to schedule your Estate Planning or Estate Administration consultation. 

-Stephanie A. Bivens, Esq.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as offering legal advice or creating an attorney client relationship between the reader and the firm or author. You should not act or refrain from acting on the basis of any content included in this article without seeking appropriate legal advice about your individual facts and circumstances from an attorney licensed in your state. Bivens and Associates, P.L.L.C. expressly disclaims all liability with respect to actions taken or not taken based on any or all information contained in this article.