You may be surprised to know that there is a whole group of assets you may own that do not pass as directed in your Will. Examples are retirement accounts, life insurance, annuities, transfer on death accounts, or jointly owned accounts. Collectively, these assets often are referred to as “non-probate” assets.
Retirement Accounts. Retirement accounts most commonly refer to Individual Retirement Accounts (IRAs), 401(k), 403(b), and SEP plans. The money in these accounts will pass to whoever you have designated as the primary or contingent beneficiary. If you have no living designated beneficiary, the money in the account will pass to your estate. That is almost never a good choice.
Life Insurance policies and transfer on death accounts. As with retirement accounts, any insurance policy insuring your life and any transfer on death account owned by you will pass to whoever is designated as the primary or contingent beneficiary. Also, as with retirement accounts, if there is no living designated beneficiary, the proceeds of the life insurance policy or transfer on death account will pass to your estate.
Annuities. If you are the annuitant of an annuity contract, after your death, any money remaining in the annuity also will be distributed to whoever is designated as the primary or contingent beneficiary, or if there is no living designated beneficiary, to your estate.
Owning non-probate property is an easy way to transfer assets to the people you choose without needing Probate Court assistance to make the transfer. However, this choice does not always make sense, so use caution and get good advice before choosing this method of transferring assets at death. It also is extremely important to be diligent in updating your beneficiary designations whenever a big life event happens, such as marriage, divorce, or a beneficiary’s need for government assistance.