Not every asset passes through a will. Certain types of property can transfer directly to a designated beneficiary, bypassing the probate process. If used wisely, this direct transfer not only simplifies the distribution of assets but can also result in efficient distribution of the estate. If not, the beneficiary designation can result in unintended transfers.
Assets that do not pass through a will
Many individuals may not realize the extent to which some assets can avoid the probate process. In Colorado, the following assets typically do not pass through a will:
- Retirement accounts: IRAs, 401(k)s, and other retirement accounts often transfer directly to the named beneficiaries.
- Life insurance policies: Proceeds from these policies are generally payable directly to the beneficiaries listed on the policy.
- Payable-on-death and transfer-on-death accounts: These can include bank accounts or investment accounts where you have specified a beneficiary to receive the assets upon your death.
These designations provide a straightforward path for asset transfer, avoiding the need for probate court intervention, which can be time-consuming and costly.
Controlling the distribution of these assets
Even though these assets bypass a will, you retain control over their distribution by carefully selecting your beneficiaries. It is important to review these documents on a regular basis. Life changes such as marriage, divorce, the birth of a child, or the death of a beneficiary can affect your initial choices. Ensure your beneficiary designations are up-to-date to reflect your current wishes.
In many cases, you can name multiple beneficiaries. You can often name primary and contingent beneficiaries, helping to better ensure that the asset has a recipient even if the primary beneficiary cannot claim it.
It is also important to note that while you can not use a will to direct these assets, you can specify in other legal documents how and when the beneficiaries should receive their inheritance, possibly setting up a trust if conditions need to be met.
By actively managing beneficiary designations and understanding the legal tools available, you can better ensure that your assets are distributed according to your wishes without unnecessary delay.