Estate settlement is the process of transferring assets from the ownership of a deceased person to his or her heirs and beneficiaries. There are three (3) methods that may be used to distribute a deceased person's assets: probate, beneficiary registration, and trust. Click on these links for more information:
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Keep in mind that more than one method of distribution may be used in each estate plan, but an asset cannot be distributed by using more than one method. A simple case study will demonstrate this principle:
Doris executed a last will and testament in 2009. She had 3 children: Lucy, Paul, and Sarah. Doris named all 3 children as equal beneficiaries in her will because she wanted them to receive the same amount of her assets. At the time Doris signed her will, she owned a home, a checking account, a car, and a life insurance policy. She wanted to use her life insurance policy to pay for funeral expenses. Lucy was designated as the sole beneficiary of Doris' life insurance policy, and Paul was a joint owner of the checking account because he helped Doris with her finances. Doris died in 2011.
How will Doris's property be distributed? The answer is that the home and car will be distributed in accordance with Doris' last will and testament by using probate; the life insurance benefits will be paid by the insurance company directly to Lucy; and Paul will acquire sole ownership of the checking account. Only the assets in probate (the home and car) will be used pay the funeral expenses, other creditors, and expenses of administration. Any money left over from the probate process will be shared equally by the children. They will not share the life insurance or checking account even though that is what Doris intended.
This simple example illustrates how different methods of property distribution may be used to deliver assets, but that an asset cannot be distributed in more than one way. In other words, documents don't always control how property will be distributed. It also demonstrates the importance of coordinating various elements of an estate plan with the assets that a person owns.