Not all of your assets will pass through your estate and be directed by the instructions you leave in your will.Assets which can be directed by your will are called testamentary assets while self-directed assets which are not directed by your will are called non-testamentary assets. This is really a very simple concept but it is important to understand it in order to properly plan your estate.

Any assets titled solely in your own name without any provisions for what happens to them at your death are testamentary assets. These may include stocks, bonds, bank accounts and real estate. Non-testamentary or self-directed assets are not controlled by a will. A joint bank account with right of survivorship or a bank account marked “ITF” (this “in trust for” account belongs fully to the depositor during his or her lifetime but passes to a designated beneficiary at death) are self-directed non testamentary assets. IRAs, 401Ks and other retirement plans usually provide for a designated beneficiary and are not controlled by a will.

One of the most common forms of self-directed non testamentary assets is the ownership of a home by a married couple as “tenants by the entirety”. At the death of either spouse, the property vests instantly and automatically in the survivor as if the deceased spouse had never even lived.

The assets placed in a living trust are also of a non-testamentary nature since it is the trust which directs their distribution and the assets of the trust never become part of the estate.A trust prepared by a competent lawyer as part of a well-thought out estate plan can be a useful tool not only to avoid probate but also to achieve a high level of certainty in the swift dispostion of your assets at death.

Self-directed assets have a very definite purpose. They may be instantly transferred to a designated person . There is no need to wait for a probate proceeding or to wonder if a dispute will cause a specific item to go to an unintended recipient in the event of a contest. That said, it is possible that the improper use of self-directed assets in an estate plan (or in an estate without a plan) can frustrate not only your scheme for the distribution of your assets but also may expose your estate to substantially higher estate taxes than might otherwise be the case. It is imperative, therefore that you consult with your lawyer about your estate plan rather than engage in “hit or miss” planning which will not always lead to the results you had intended.