The Estate Plan
To start with, let’s recognize that everyone has an estate plan. Although it may not be the plan we want, all assets have a distribution method tied to them. I call them the Estate Planning COPs.
Contract
"C" is for contract and is the first way assets are distributed. Contracts can be found in any policies or accounts that have a beneficiary tied to them. Items like life insurance policies or retirement accounts have a beneficiary designation. This designation is a contract that will involve distributing these assets to the selected beneficiary as the first step in asset distribution.
This may affect a farm operation if a life insurance policy was bought to help a returning heir buy the farm from their siblings or pay off existing debt. Or, if the funds from a retirement or investment account are supposed to go to the non-farming heirs.
The good news is that the beneficiary documents can be easily updated to accomplish the goals of the family.
Ownership
Ownership is the second step in asset distribution. Any asset with a title has a transfer distribution plan. Titles can represent ownership transfer between joint owners or indicate ownership by a trust or a business entity.
Careful use of titles should be part of the estate plan. Mistitling of bank accounts can lead to the misdistribution of the assets at the death of the owner.
For example, a child may be added to an account as a signer. But, if done incorrectly, and the paperwork says they are an owner, any cash left in those accounts would go to that child.
Additionally, using transfer on death, or TOD designations, makes that person an owner of the asset. This opens the asset up to issues in the case of divorce, bankruptcy, some types of disagreements, or any lawsuits brought against the other owner.
Given these examples, titles must be reviewed for accuracy to ensure they are appropriately managed as part of the estate plan.
Probate
The final distribution method is probate. Probate is a legal proceeding that occurs before a judge to finalize the estate.
Probate basically occurs in two instances: if you die with a will or without a will.
The catch is what happens during those two options. If you pass away without a will, it is called dying intestate. And in this case, assets are distributed to your heirs, but without any direction from you or regard to your wishes. Generally, all assets will be divided equally among the surviving heirs. This may lead to the sale of these assets, as we need to define what "equal" means, and this is the only way to ensure everyone receives their equal distribution.
The other way is to have a will that lists who receives each asset. When used in combination with updated and correctly designated beneficiaries on life insurance policies and other accounts, correctly titled assets, what remains is usually personal property or other non-farm related items.
If you have a list of personal items that you want distributed to specific individuals, it should be included with your will. This list could include jewelry, collector items, personal vehicles, and family heirlooms.
Source : sdstate.edu