Wills Do Not Control All Assets

Wills usually contain language that explains what is to happen to all of the assets of the “testator” (that’s legal talk for the person who makes the will).

For example, in California’s new statutory will form (See Legal View July 16), the will begins by making specific bequests of property--your residence, your automobile, and so on. Later, the form will says: “I give the balance of my assets as follows . . . “ and you fill in the blanks. You might expect that the “balance of my assets” includes just about everything else that you own.

But, that’s not so, for most people.

Not everything you own is controlled by your will.

There are several categories of assets that may pass to assigned individuals outside of your will, no matter what the will may say.

The first and most obvious such asset is your life insurance policy. Your policy is a contract between you and your insurance carrier, which permits you to name one or more persons who are entitled to the proceeds of the policy upon your death--these people are called your beneficiaries. An insurance policy is usually an important and valuable asset in your total holdings. In many cases, it may be the largest asset you own, because even people who are not worth a half million dollars may decide to have a life insurance policy in that amount.

The beneficiaries get the proceeds. Your policy says who the beneficiaries are; your will does not determine who gets those proceeds.

Retirement benefits may be similar, since the individual benefits at a company are usually set by you and the company, not your will.

There is another kind of property that passes outside your will--property owned in joint tenancy. When property is owned in joint tenancy, the right of survivorship passes to the remaining joint tenant upon the death of the other one.

The word tenancy really doesn’t fit here, and it may just confuse you. A joint tenant is not the same as a tenant in a lease. A tenant in a lease is not the owner of the property. A joint tenant is an owner, in fact, a special kind of owner. When Bob and Bill own a house or other property, even a bank account, as joint tenants, and Bob dies, then Bill alone becomes the owner.

Joint tenancy are magic words. By using them, you are essentially doing a form of estate planning because you are saying that your co-owner will inherit the property upon your death. No matter what your will may say.

There is another kind of common ownership called tenancy in common. You do control the succession to your co-ownership interest in property held in tenancy in common. Your will determines who gets that interest. There is no automatic survivorship provision.

There are other forms of ownership that automatically determine who will own your property upon your death, the most common of which is a trust. There are both revocable or living trusts and irrevocable trusts (ones that you can’t change) that can hold property and determine the succession of the property ownership upon the death of the trustee.

It is commonly said that property that passes outside the will does not go through probate. Next week, we’ll explain a bit more about probate and how that works. Stay tuned.

Klein is an attorney and president of The Times Valley and Ventura County editions. Brown is professor of law emeritus at USC and chairman of the board for the National Center for Preventive Law. They cannot answer mail personally but will respond in this column to questions of general interest about law. Do not telephone. Write to Jeffrey S. Klein, The Times, 9211 Oakdale Ave. , Chatsworth, Calif. 91311.