Significance

• You want your property to pass to the people you intend to have it when you die. This is one of the most important issues any of us have to deal with at the end of life. Because of this, it is important to understand how the different mechanisms work to transfer property.
  
  

Types

• There are two main kinds of property when someone dies. One kind of property passes to others outside of the decedent's estate, while the second type becomes part of the estate. Property can pass outside of an estate through trusts, joint ownership or through pay-on-death accounts. Some benefits are paid after death to people the decedent named as beneficiaries before he died. These include benefits from IRA accounts and life insurance policies. Property that does not pass automatically at the time of death becomes part of the estate. The property in the estate will pass according to a will or under the state laws where the decedent lived, or the property is located, when there is no will. This process of distribution is called probate. Probate applies only to the property in your estate and not to property that passes automatically.
  
  

Effects

• The proceeds from a life insurance policy are payable on death to the named beneficiary and never belonged to the insured. When the insured person dies, the proceeds do not become part of her estate. The proceeds become the property of the person named as the beneficiary in the policy. The only time the payment of life insurance proceeds will affect a will is if the estate itself is named as the beneficiary of the insurance policy. In that case, the proceeds would be paid into the estate and distributed through probate.
  
  

Considerations

• Property that you own at the time of death may be subject to state or federal estate taxes and probate fees. If the insurance proceeds were paid into your estate, they would then be subject to those taxes and fees. For that reason, it is very rare for anyone to name his estate as a beneficiary in a life insurance policy. You can change the beneficiary of your life insurance policy at any time during your life, but you cannot do it by naming a new beneficiary in your will. You have to change the beneficiary directly with the insurance company.
  
  

Prevention

• To make sure that your property will go to the people you want to have it and that they or your estate will pay the smallest possible amount of taxes and fees, you can have your estate plan checked by a professional, such as an estate planning attorney. She will be able to advise you on the best estate planning for your situation.