wills.about.comWills, Trusts, and Estates: Facts You Need to Know

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Catalano Reviewed by Thomas J. Catalano Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. learn about our financial review board In This Article View All In This Article What Makes Up Your Estate? The Statistics on Who Has a Will When You Die With a Will A Will vs. No Will Intestate Probate Administration Untitled Assets Assets That Pass Outside of Probate The Role of Trusts Revocable vs. Irrevocable Trusts Trusts for Specific Purposes Photo: Image Source / Getty Images Estate planning conjures images of conniving lawyers and bankers discussing million-dollar trusts for many people and considering which conditions to place on a bequest to a ne’er-do-well relative. But that’s not usually the case. Even people of modest means can spare their loved ones serious headaches by creating an estate plan and will to dictate what happens to their property at the time of their deaths. What Makes Up Your Estate? Your estate” is everything you own—all your property and property rights, even assets with loans against them. They don’t die when you do. They have to move into the ownership of a living beneficiary, because a decedent can’t own property. Note How your property is managed and distributed after your death depends on whether you die testate,” meaning with a valid will, or intestate” without a will. The Statistics on Who Has a Will The number of people who have wills has been steadily declining in the millennium, according to a 2020 survey by Caring.com. Almost 25% fewer American adults had wills in 2020 compared to 2017. Even older adults are less likely to have wills. Their number dropped by 20% in 2019, and 25% fewer middle-aged adults had wills in that time frame. When You Die With a Will Leaving a will ensures that your wishes are carried out, if possible, and your property is distributed in the way you choose. It can also make probate of your estate much easier. Note Probate is the legal process by which ownership of your property is transferred to living beneficiaries. The court also uses the probate process to establish the validity of a will, when the deceased left one. You will designate an executor in your will. The executor is someone who will manage your estate through the probate process and see to it that your wishes are carried out. A Will vs. No Will Dying intestate—without a will—doesn’t mean that your loved ones will avoid a court proceeding. Intestate estates still require probate , but state law gets involved to determine who gets your property, because you didn’t outline your wishes in a will. Note Each state has its own legislative code for intestate succession: who gets to inherit first and in what percentages, as well as who won’t inherit, unless everyone in line ahead of them is also deceased. The hierarchy in most states places surviving spouses first in line, followed by the decedent’s children, then parents, siblings, and, finally, more distant relatives. Individuals who aren’t related to the decedent are left out entirely. Intestate Probate Administration Every state has a scheme that will dictate the steps of intestate administration, but the typical process goes something like this: Someone initiates a case in probate court. The court determines that there is no will and appoints an administrator rather than an executor, usually a family member or heir. The administrator gathers the deceased’s assets, identifies the heirs, and notifies the deceased’s creditors. The administrator liquidates estate assets to the extent necessary to pay the deceased’s debts, taxes, and the costs of estate administration, such as attorney’s and accountant’s fees. The administrator distributes the remaining proceeds and assets according to the intestate succession schedule set out in state statutes. Intestate administration is often a lengthy, inefficient, and expensive proceeding because the administrator is usually required to seek permission from the court for each of these actions. The administrator will spend much time requesting court orders and attending hearings. An intestate administration often takes two years or longer. Untitled Assets Some assets can pass directly to an heir if there’s no need to officially pass title to the property. Personal property like furniture and jewelry usually won’t have documentation to establish ownership. Note There may be no need to go to court if your estate is composed entirely of untitled assets, unless your heirs can’t agree among themselves on how to distribute this property. Assets That Pass Outside of Probate Some assets will pass directly to your heirs outside the probate process even if you do leave a will. Your spouse will take sole ownership of at least their share of community property if you’re married and live in one of the community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Wisconsin, and Washington. Some assets transfer automatically because they’re contractual in nature—you designated a beneficiary who will take ownership when you die. They include life insurance proceeds, annuities with death benefits, and many retirement accounts. Bank accounts often have payable on death” provisions that allow you to designate a successor. In each case, there’s no need for the intervention of a probate court, because the account already has a legal...