Whenever we think of the process of transferring property at death, we always think of wills; however, there are numerous other ways of transferring property.
Let’s first look at life insurance. Life insurance is a contract. For a premium, the life insurance obligates itself to paying money at death. The money being paid need not go through your estate and need not be subject to your will. Nevertheless, your estate can be the beneficiary and in that way, money can pass through your estate. More frequently, a loved one is the beneficiary of the insurance proceeds. Sometimes, a trust is the beneficiary. The trustee accepts the money and pays the money out as directed in a trust, not a will. The trust then acts as a will substitute.
Then there is jointly held property. The term “JTWROS” stands for “joint tenants with rights of survivorship.” As the term implies, upon death, the surviving “joint tenant” succeeds to full ownership. Real estate and personal property can be jointly held. Real estate title and personal property ownership can pass to joint tenants without the necessity of passing through a will. Many bank accounts are held in joint tenancy. When people die, it frequently occurs that the surviving joint tenant simply takes over the bank account(s).
I would be remiss if I didn’t contrast ownership as “joint tenants with rights of survivorship” with ownership as “tenants in common.” In each of these ways of owning property, each “tenant” owns an undivided interest in the whole. If there are 2 “tenants”, each owns a 1⁄2 interest in the whole. When property is owned as tenants in common, the 1⁄2 interest is inheritable and passes under a person’s will. The JTWROS type of ownership speaks for itself – the 1⁄2 interest is acquired by the surviving joint tenant without it having to pass under a will.
Some people set up bank accounts for the benefit of others (for example, a child). We refer to those accounts as “Totten Trusts.” These trusts are only effective upon death. Until then, the money in the account still belongs to the depositor.
Completed gifts can take place during a person’s life. These gifts can include bank accounts. Delivery of the passbook is necessary, along with “donative intent” being shown.
The contents of safe deposit boxes have been given scrutiny. This is because fraud can be easily perpetrated. Where a safe deposit box is rented to two or more persons by contract with a bank, when death occurs, access is then allowed to the joint owner of that box. However, the fact that the safe deposit box is rented to two persons does not set up a presumption of joint ownership of the contents.