Property: Probate or Non-Probate?
Whether you know it or not, in estate planning terms all of your property falls into one of two categories: probate or non-probate. This matters because Wills typically only control what happens to probate property. (And if you're currently sighing a bit and thinking, “here we go...” you're not alone.) Probate is the name for the court process (and sometimes the name of the court department itself) that deals with Wills. Probate property is quite literally “property subject to a Will.”
The best way to understand probate property is to actually identify all of the types of property that are not included. The most common forms of non-probate property are:
Real estate that you own with someone(s) else as “joint tenants with right of survivorship” or “tenancy by the entirety” (or community or marital property in other states where such laws apply);
Proceeds from a life insurance policy that pay to a named beneficiary;
Retirement or pension funds that have a death benefit that pays to a named beneficiary;
Financial accounts and investments with Pay-On-Death or Transfer-On-Death beneficiary designations;
Vehicles (and other items of property) you own with someone(s) else via the title of the property itself; and
Property owned/titled in the name of a Revocable Living Trust.
All of the above aren’t controlled by your Will because what happens to them when you die is built into the ownership (or controlling paperwork) of the property itself. Except (of course there's an exception!) if there is some reason the property cannot go to the designated person(s) – such as they refuse the gift (it happens!) or they’ve already died themselves Then, that non-probate item becomes probate property by default and is controlled by what your Will says.
Many people own a significant part of their assets as non-probate property. Estate planning is still very important even if that’s true for you, if for no other reason than the exception to the exception noted above. Why? Because of intestacy (cue dramatic & ominous music). More on that here.
Looking for more info? Check out the Related Posts below. Ready to get going on estate planning? Contact me.