When a loved one dies, many people often think that you must open an Estate and go through the probate process. While many times this may be the case, this is not always necessary. Assets pass three ways upon death: (1) by ownership; (2) by contract; and (3) by will. Starting with ownership, if assets are owned by a decedent and another individual jointly, the asset passes to the surviving joint owner by operation of law upon the decedent’s death. Nothing has to be done to make the asset the surviving joint owner’s. This is often the case when thinking of a home jointly owned between husband and wife or a bank account.
Next, assets pass by contract. This generally means that any assets owned with a beneficiary designation pass directly to the beneficiary upon the decedent’s death. Many common examples of these types of assets include life insurance, IRA’s and annuities.
Assets which fit into categories 1 and 2 do not require the raising of an estate. All of the paperwork and tax can be paid without going through the probate process.
Finally, any assets that do not fit in categories 1 or 2 pass to beneficiaries by will. This is designated by the decedent when the will is made.
Most often, an estate only needs to be opened when there are solely owned assets listed in the name of the decedent. Too many times we see clients come to us after they have opened or raised an estate only to learn that he or she did not even need to start the process. Once an estate is raised, the Pennsylvania Estates and Fiduciaries Code requires many court filings and notices to be sent to the beneficiaries, as well as advertising of the estate (in most cases), which can be costly. Therefore, we always encourage you to see one of our estate administration attorneys prior to doing anything with regard to the assets of a deceased individual.