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What is an ‘estate’?
The term "estate" consists of all the property a person owns or controls. This property may be in his or her sole name, held in a partnership, in a joint ownership arrangement, or through a Trust, and all other monies that would be generated on the person's death, such as through life insurance. It includes:
(1) Real property and things attached to it (houses, buildings, barns, etc.);
(2) All personal property (including automobiles, bank accounts, stocks and bonds, mutual funds, stock options, cash, furniture, jewelry, art, collectibles, etc.);
(3) All businesses and business interests (sole proprietorships, partnerships, corporations, joint ventures, and the goodwill, inventory, tools and equipment, accounts receivable, and other business property, etc.);
(4) Powers of appointment (the right to direct who gets someone else's property);
(5) Life insurance and annuity contracts, pension benefits, IRAs, 403(b)s, etc.;
(6) All debts and obligations owed to others;
(7) All debts and obligations owed to the person or estate; and 8) All other claims against others, such as for the pain and suffering from an auto accident.
An estate does not include assets a person has transferred to an irrevocable Trust during his or her lifetime. If a Trust is irrevocable, it means the assets can’t be taken back. So once the transfer is made, the person no longer owns or controls those assets, even if the Trust continues to benefit that person. When a person dies, other property a person owned is no longer included in that person’s estate. Property that the deceased has placed in a revocable Trust, such as a Living Trust, irrevocably belong to the Trust when the person who set up the Trust (Trustor) dies, and all the assets of the Trust are no longer part of the deceased’s estate (though they may be considered for tax purposes). Other property is also excluded from the estate when the property passes directly to another on the former owner’s death. For example, insurance policies, pension funds, and U.S. Savings Bonds with named beneficiaries, property owned with a right of survivorship, and bank accounts that pass directly to a named party (also called pay-on-death accounts and Totten Trusts) are not considered part of a deceased’s estate. |
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