There are four ways to transfer assets upon death. The first is by contract such as a beneficiary designation which is a contract entered into with a financial institution or life insurance company to distribute the account to a specific beneficiary upon the account owner's (or insured's) death. Other types of contracts may be better known as "paid on death" accounts.
The second way is by operation of law which is determined by how the asset is title such as tenants in common or tenants by the entirety. Tenants by the entirety is only available for married couples (and registered domestic partners in Oregon) which means that upon the death of the first spouse, the property is immediately transferred to the surviving spouse. On the other hand, tenants in common do not have rights of survivorship unless it is so stated on the title; i.e., tenants in common with rights of survivorship. Property owned as tenants in common passes in accordance with the Will. Property owned as tenants in common with rights of survivorship passes immediately to the survivors upon the death. In other words the law governs the transfer. All that is needed is the correct words on the title to make it happen.
The third options is by Will. A will is a set of instructions to a personal representative and to the court as to the distributions of assets upon death. To be effected, a will must be probated in court for the purpose of verifying authenticity of the will and to provide court supervision in carrying out its provisions. A will may be useful for smaller estate where cost is the primary factor or where a person would prefer the supervision of a court. A will may also be more appropriate for younger families with minor children.
A trust is the fourth option and the recommended option for people over 55 years of age and with moderate to large wealth. A revocable trust does everything a will does and more. A revocable trust is an agreement between the settlor (creator of the trust) and the trustee as to how the trust will be managed, administered and distributed for the benefit of the beneficiary(ies). With revocable living trusts, the creator of the trust is also the trustee and the beneficiary. When the settlor dies or becomes incapacitated, the successor trustee assumes the role and continues to managed, administer and distribute the trust and its assets according to the terms of the trust. Since the creator of the trust is not longer deemed to own the assets because the trustee owns them, there is estate to probate. These types of trusts are useful for tax planning, for second marriage planning, and for incapacity planning.
When designing an estate plan for a family business owner, all of the tools identified here are used to meet the owner's goals and then some more. For more information about how these tools and others can be used to meet the goals and objectives of a family business owner, contact the estate planning lawyers at Ater Wynne.
