Many assets are structured in such a way that the owner can designate who will be the new owner upon the present owner's death. The form used to do this is often called a beneficiary designation. The act of designating the beneficiary or the fact of a beneficiary having been designated are also referred to by the term. Examples of assets which often allow beneficiary designations are life insurance policies, retirement plan interests (such as pension, profit sharing and 401k plans), and IRAs. Bank accounts often allow the equivalent of a beneficiary designation. This can be referred to as a pay on death account or a tentative or Totten trust account. The designated beneficiary gets it on the death of the owner, but has no rights as long as the owner is alive.

There are other assets where the type of ownership allows the equivalent of a beneficiary designation. A joint tenancy is an example. When an asset is owned by two people in joint tenancy the survivor winds up with sole ownership. This differs from a beneficiary designation in that all joint owners have a present equal right to full use of the whole asset. Also each joint owner can withdraw the entire asset if it is a bank or brokerage account unless the parties create a restriction on the right. Trusts also allow the designation of persons who will take after the death of an original owner, but the original owner's rights are restricted. The trustee is the actual owner.

If a beneficiary is designated for an asset, ownership of that asset passes without a probate. Usually the asset is no longer subject to the claims of the decedent's creditors because they can file their claims only against assets that would be in the probate estate if one were opened.

Donald M. Thompson * 55 W. Monroe #3950; Chicago, IL 60603
Ph: 312-782-0844 * Fax: 312-201-1436 * Email: donthompsonlaw@sbcglobal.net