What is a Testamentary Transfer?

When someone passes away, their estate must be distributed. A testamentary transfer is the distribution of the deceased’s estate to the designated beneficiaries according to the manner defined in the will. This is why a will is so important; it provides a smooth transition of the estate’s assets. But it’s not the only way an estate’s assets can be distributed.

Non-Testamentary Transfer Distribution of Estate Assets

One way or another, the assets of a deceased’s estate must go somewhere. Here is a basic overview of possible transfers:

Spouse. If the deceased was married and assets were held in the names of both spouses, then the surviving spouse maintains control of the assets. If the deceased held assets in his or her name alone, then a will would designate beneficiaries of those assets. If the deceased’s assets were held in a lifetime trust, an inter vivos transfer would have already taken place and the trust’s beneficiary would take over control of the assets. If there was no trust, the assets would go to probate for distribution.

Inter vivos transfer. This transfer takes place while the person (now deceased) was alive. This type of transfer can include a revocable trust even though the person retains control over the assets while still living and the beneficiary only gets control once the person is deceased.

Probate. If no will exists or assets were held solely in the deceased’s name and not included in the will, then the estate goes to probate. In this case, a probate court gets involved and assigns an executor of the estate to transfer ownership of all assets. The executor contacts creditors, pays debts, taxes and expenses, and distributes the remaining assets as defined by a will (if any) or intestate succession laws.

Having beneficiaries designated for distribution via a will, trust or through other legally designated means of transfer (such as beneficiaries designated for securities) simplifies the process. If no beneficiaries are designated, then the executor will have to assemble all necessary documentation needed to make the transfer possible. For example, with securities, the executor will work with a transfer agent to coordinate the transfer of ownership.

Transferring ownership of securities, however, involves an extra step.

How to Transfer Non-designated Securities

This process is straight-forward but does involve several steps. In short, to transfer the securities, the executor or trustee will need to provide several documents to a transfer agent who handles the securities. The executor or trustee will also need to have their signature verified via a medallion guarantee.

We cover this process more in more detail in our post “Stock Ownership and Getting a Medallion Guarantee After a Death in the Family.”

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