The end of our earthly lives will come sooner or later. When we die, we can be buried with things we own, but most contemporary faiths believe that those items will not accompany us in our post-earthly lives.
Where do our assets go when we die? If we do not plan, Ohio law will decide to whom our assets will go. We can avoid the legal “default” distributions of our assets if we plan, which plans are typically called “estate plans.”
The distribution of some of our assets can be governed by contracts. Examples of these contracts include life insurance, investment accounts, bank accounts and trusts.
For instance, if I name my nephew as the beneficiary of a life insurance policy on my life, the life insurance company will have a contractual responsibility to pay my nephew the life insurance benefits upon my death. My nephew gets the benefit of that contract by providing my death certificate to the life insurance company and providing details on whom he is to satisfy government reporting requirements. In other words, when I die, my nephew keeps the life insurance company honest, and the life insurance company keeps my nephew honest.
If any particular asset is not governed by a contract when I die, that asset will be distributed to whomever I have identified in my will. If I do not have a will, then Ohio law will identify to whom my assets (other than those subject to a contract) will go. This process is called “probate.”
In probate, the asset distributor is the executor. The question then becomes, “Who keeps the executor honest?” Simply put, the probate court (the judge) serves as the overseer of the executor and “keeps the executor honest.” Therefore, there is generally no reason to be alarmed by any particular person serving as an executor because the acts of an executor are reviewed and approved by the probate court.
However, the probate court’s involvement is not free, and it is not immediate. Thus, probate can take longer and cost more money to facilitate than when assets are distributed through a contract.
Notably, assets that go through probate are only those assets that are not subject to a contract. Therefore, if my life insurance policy directs its benefit to my nephew but my will gives everything to my brother, my nephew will get my life insurance benefit, and my brother will get everything else.
Similarly, if a will only provides instructions on where some assets are to be distributed, Ohio law will “fill in the gaps.”
Resultingly, someone may have a life insurance policy that gives money to a nephew, a will that gives a car to a brother and some jewelry that is not specifically disposed of, which jewelry will go to the person’s spouse, children, parents, siblings or nieces and nephews in that sequence.
To simplify that complexity, trusts are often used. A well-written trust can sometimes (among other benefits) serve as a “master distribution plan” for all assets.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.