How to Transfer Assets to the Next Generation [video]

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Hello, I'm Stephanie Burnham. I'm an estate planning attorney licensed in New Hampshire and Massachusetts. Today, I'd like to talk to you a little bit about how your assets would transfer from you to the next generation. In the event you passed away. Transferring assets is all about ownership. It's all about how they're owned and what tools can be used to transfer those assets where they need to go.

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It's the main purpose of estate planning, how we get things, where we want them to go and what tools we use to get them there. Now, the first tool I'd like to talk about is what we call beneficiary designations. Beneficiary designations are document outs that say if something happens to you where you want those assets to go, only they're very specific.

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Beneficiary designations are things that are used for life insurance or retirement accounts, pensions and annuities. These assets are based on a contract. They're based on a contract that you have with the company that holds them. So as you pay into your retirement account, the financial company would give you a form called a beneficiary designation. And that form would say on it, if something bad happens to you, who do you want us to pay the money you've given us to?

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Where do you want that money to go? So this beneficiary designation is there so that if something bad happens, the people named in your beneficiary designation can contact the company, and the company will send them a bunch of forms called beneficiary claims forms. And they'll process those forms. And then they will transfer the money to the people that are named in that beneficiary designation.

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There's no fancy processes. It's mostly just paperwork. And as I mentioned, these things are primarily used for life insurance, annuities, retirement accounts and other financial institutions that are holding some of your money. Now, not everything has a beneficiary designation. For example, if you own a home, your home doesn't likely have a beneficiary designation. Instead, what you have is you have a document that's recorded at the Registry of Deeds that says you own Black Acre or Main Street, whatever it is that you happen to own.

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That deed says that you are the owner, and it's kept to the Registry of deeds, where the public can determine that you, in fact own that property. In order for you to transfer that property, you're going to have to sign a deed that also is recorded at the Registry of Deeds, saying that you want that property to now go to a third person.

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And the way you would do that is you would go to a real estate closing, whereby you would sign a deed and you would give that deed to the person buying your home. And the person buying your home would give you a check that you deposit into your bank account. But if you pass away before you get to that closing, who's going to sign the deed?

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You can't sign the deed because you're not there, and you are the person at the Registry of Deeds that the public acknowledges, owns that property. So we needed a mechanism, some kind of process in which we could go ahead and appoint someone to be able to sign that deed for you. Now that you've passed away, and that's what probate court was designed to do.

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Probate court was designed to go ahead and have someone be appointed in your shoes in the event you pass away, so that someone could sign that real estate deed, or someone could sign your checks out of your banking account. Someone could sign the back of your car title so that you could have your car title transferred. It's all really about being able to sign documents so that they can be transferred.

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Now, when you're an individual and you pass away, since no one can sign on behalf of these assets but you, someone needs to be appointed and that person is appointed by a probate court judge. The judge will receive a petition from someone that wants to serve as that person authorized to sign, and the judge will then issue them what's called a certificate of appointment.

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Sometimes they're also called letters of testamentary. But these documents are documents provided by the probate court, by the judge appointing someone or authorizing them to be able to sign documents on behalf of the person who passes away. Now, if you don't have any estate planning in place, say you just haven't gotten around to doing anything. Not to worry.

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The state legislature came up with a set of laws called the state intestacy laws, and they have said that if you don't have a last will and testament or other estate planning document in place, they have already determined where your assets are going to go. Some of your assets will go to your spouse, some may go to your children.

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Some may even go to your parents. All based on this set of laws called the intestacy laws. Now, if perhaps you might have other people in mind that you'd like to receive these assets, maybe a friend or a partner that's not necessarily a spouse yet a last will and testament is a really good way of making sure that your assets go to that person.

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Now, a last will and testament has to go to probate court in order for it to be valid. The probate court judge has to actually look at that will and say, yes, this is valid. And yes, I'm going to appoint the person. But that last will and testament replaces those intestacy laws and allows you to control where you want your stuff to go in the event you pass away.

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So what's the big deal about probate? A lot of people have said that they really don't want to deal with the probate court process. And sometimes people have suggested, oh, you should never go through the probate court process. And if you haven't done it, the question becomes, well, what's the big deal? Why do people say that they don't want to go through the probate court process, or that you should avoid it?

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Well, probate court can take a while to get through. Right now in New Hampshire, it's taking on average about 90 days from the date a petition is filed with the court for the court to be able to get through the paperwork and issue a certificate of appointment. And that can be for a variety of reasons. right now may be a staffing issue where they just don't have enough help.

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but ultimately it can take up to 90 days, sometimes a little bit longer, especially if there are other rules or other, responsibilities that the court has ordered that the petitioner file before they receive their appointment. And what I mean by that is when the petitioner files that petition saying, I agree to be the administrator of the estate, it's not always automatic.

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Sometimes a bond must be filed, and a bond is an insurance policy that says that if the executor or administrator makes a mistake, then the state will be made whole, that the insurance policy will cover that mistake, and make sure that the beneficiaries and the creditors of the estate are able to receive what they were entitled to, even though the administrator might have made a mistake that caused a loss to the estate.

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If a bond is necessary, that can take a couple weeks to actually, obtain and then send to the probate court, and that can delay receiving your certificate of appointment. Now, after you receive your certificate of appointment, you don't get to just sell everything and pay all the bills and transfer all the stuff. Instead, the probate court has additional things they want the administrator to do.

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For example, they want them to file an inventory telling all the heirs and the court all of the assets that belonged to the person who died and how much they were worth at the time the person passed. That's due within 90 days of being appointed. Then the estate sits for up to six months, because the next period of time that runs is the creditor claim period.

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That means that creditors have six months to make a claim against the estate from the date the petitioner is appointed. So even though it's already taken three months for our petitioner to become the administrator and be appointed. It's still going to be another six months after that, before the administrator can feel confident that they've received all of the bills and all of the claims against the probate estate.

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So now we have people that have waited nine months to get paid, but first we have to pay the creditors. After all of those bills finally get paid. Then the executor or administrator can start the job of transfer, owing the assets to the beneficiaries. So realistically, the probate court process can take a year or even more, depending on whether or not the beneficiaries want to argue about who gets what and whether or not.

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It's fair that certain people are receiving certain assets and they're not. So that's one reason why people don't care for probate court. It takes a really long time, and people get a little bit impatient because while they're willing to wait for a little while waiting an entire year to be able to administer the assets can really be frustrating for family members.

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Now, in addition to the probate court taking a pretty decent amount of time, it's a very public process, meaning that anyone can go down and look for your probate estate if they know you passed away because an obituary was filed, they can go to the county in which you lived and read your will and look at all the paperwork that's been filed.

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And that can lead to some very interesting circumstances, like your nosy neighbor finding out about who's getting what and when, or a disinherited heir being very upset about not receiving anything, and having a copy of the will and being able to challenge it. It also has led, in some instances to people making fraudulent claims, because, after all, they find out that you're assets, you owned a home and you had a bank account and how much these assets are worth.

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But then they also find out that the person administering it may not live nearby. And it's very simple for them to send in a bill that says, oh, I painted grandma's house last summer. She still owes me $10,000. Please pay me $10,000. In some instances, it can actually be less expensive for the executor to actually pay that money than fight it out and argue about that claim.

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So having it be public can be really a problem, or lead to instances in which somebody makes a fraudulent claim. And that leads to the third reason why people don't like probate. It costs money. It's costly. In every instance you have to file, you have to pay a fee. When you file your petition for a state administration. And in most instances, because things are delayed, there can be interest and penalties added to you.

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Debts that have not been paid because you're waiting for that six month creditor claim period to file. There can be legal fees involved because it gets frustrating and complicated when it comes to filling out these different forms. So not only are the assets not earning interest necessarily are not growing in value while they're waiting, but you have bills that are increasing in value for every single month they go unpaid.

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And then other people that you need to pay to help you administer. So it can be costly. Lastly, quite frankly, most people consider probate kind of a hassle. The only people who really don't mind the probate court process are the people that deal with it every single day, like the clerks and probate attorneys. For us, it's just another day for everyone else.

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It's delays and cost and annoyance. So those are some of the reasons why people try and avoid the probate court process. Now, we talked about your asset, like your house being subject to the probate court process in the event that you pass away because you can't sign the deed. Well, how do we get it out of the probate court process?

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What do we do? Well, there's a third way assets can pass. I like to call it operation of law. Operation of law is laws that say that assets can transfer certain ways based on certain vehicles or documents. One of those ways is what's called joint tenancy with rights of survivorship. Joint tenancy with rights of survivorship is a legally 100% ownership by two or more people.

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Most husbands and wives own their home in that kind of tenancy, where it says that both the husband and the wife or the spouses own 100% of this house. And if something happens to one of those spouses, the other one already owns 100%, and there's no process to go through. So we use joint tenancy when we have married couples that own property together and want to make sure that if something happens to one of them, the other one already owns the property.

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And that works really well between spouses. But it can be a little bit stressful if you're now involving children or parents in order to avoid probate court. Because when you now have 100% ownership by two or more people, you now have somebody else who also has an interest in your house. What if you want to sell your home, but your child who grew up there says, now, I would like to inherit my family home?

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Well, if they're listed on the deed as a joint owner with you, they have the ability to stop your sale. Or what about the instance where you have a joint bank account, where you put your child on the bank account to make it convenient to avoid probate, and so that they can pay the bills and avoid those delays that come with the probate court process?

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Well, that child now owns your bank account. And if they're getting sued or they're going through a divorce or they go on vacation, you may find that your account is frozen or your account is now needing to be disclosed in a divorce action because it's considered owned by your child going through the divorce. And that's soon to be no good.

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Ex is looking for a fair share of your bank account, or you may end up getting that postcard from that child, spending that inheritance early. So joint tenancy can sometimes be a little bit stressful when it comes to bringing kids involved into your assets. That's where trusts come in. Another operation of law is the creation of a trust where you, as the creator, can decide who's going to get what and when they're going to get it.

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You have the ability of changing the terms of a revocable trust and using these assets no different than you use them now. They're still considered yours. You're still in charge. You still sign the checks, but with a trust, the benefit is in the event something happens to you instead of you owning the assets directly, which results in probate court.

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Your trust owns these assets. And when your trust owns these assets, the trust says, who's in charge next? And that person can step into your shoes as the manager of the trust and make sure that the bills get paid and the family can use the assets in the event that you pass away. It's a great way of making sure that family, businesses, or farms can stay in operation while the family is figuring out what to do next, because when you're in probate court, the judge may end up having to stop running a business or stop certain activities if any of the heirs object, or if somebody comes in and says they're not happy with how

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things are being handled with a trust. Now these things can be handled without a judge being involved, which means that now the family can continue to operate that business and get those bills paid, and try and handle everything without the stress, delay and worry of probate court. I hope you found this information helpful, but it should not substitute for good legal advice.

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Please take some time and meet with your own attorney to discuss your particular circumstances. Thank you very much and have a great day.