Assets which are subject to Probate vs. Assets that are non-Probate

When someone prepares a Will, a common misconception is that everything the testator owns gets passed through the Will to beneficiaries. However, not all assets will pass through the Will. Only assets subject to probate get passed through a Will. This article explains how we know if an asset is passed through a Will and why it matters.

Generally, the assets which pass under the terms of a Will (probate assets) would include specific bequests of personal or real property and sums of money. Included would be accounts that are titled only in the testator’s name without a specified right of survivorship, insurance policies and other investments provided they contain no beneficiary designation. The lack of beneficiary designation is the key.

If a contract, like an insurance policy, names a beneficiary, that policy does not pass through the Will. It is considered a non-probate asset and it will be distributed outside of the estate. An easy way to think about this is, if the contract already has a provision for what happens upon the death of the owner, the contract terms apply, not the Will. Joint accounts with a right of survivorship are similar assets that will not pass through the Will; rather, the account will pass to the surviving account holder upon the death of the other. Real estate is often jointly titled, so upon one person’s death, the property passes by law to the survivor. If the house is owned by one person, and not jointly owned, it would be a probate asset and pass through the Will.

The reason it matters whether an asset is probate or non-probate is because the tax consequences will be different, depending on how the asset is classified. This is information the executor and his/her attorney will need to know. It is also helpful to know when preparing your Will, so that assets that pass through the Will are included in the Will.

If you have specific questions about preparing your estate plan, contact the estate planning attorneys at Maselli Warren, P.C.