In the estate-planning and estate-administration world, all tangible and intangible property that a person may own at the time of his or her death can be roughly separated into two groups: property that must pass through probate and the property that does not. This may seem like a silly distinction that only attorneys and legal professionals with too much time on their hands would worry about. As will be shown, however, this is a distinction with a difference: if you do not handle your probate and non-probate assets appropriately in your estate plan, your intended heirs and beneficiaries may be left with heartache and disappointment – and not with the assets you originally intended to give them.
What is a Probate Asset?
For starters, “probate” refers to the process by which a court determines the admissibility and enforceability of a will purportedly created and executed by the decedent. Probate also refers to the process whereby the decedent’s probate assets are administered and distributed under the supervision of the court.
A probate asset can be defined as any asset or possession that is legally held and possessed only by the decedent. This can include certain life insurance policies (if the beneficiary is listed as either the decedent and/or his or her estate); real estate, depending on how it is titled; and personal possessions like furniture, artwork and/or personal effects.
What is a Non-Probate Asset?
Like the name implies, non-probate assets are those that do not come under the supervision of the court upon the death of the decedent. Instead, these assets usually have specific instructions that describe to whom the asset or property goes upon the death of the decedent. Common examples of non-probate assets include certain kinds of real estate, any property owned by a trust, retirement accounts and life insurance policies (if the named beneficiary is a person other than the decedent or the decedent’s estate), and bank accounts or deposit accounts designated as payable-on-death (P.O.D.).
Why the Difference Matters
When crafting your estate plan, you want to ensure that your plan accurately captures what you want to happen with your assets upon your death. Changing a will may not accomplish this if you wish to change how your non-probate assets are handled. For example, a will that designates Person B as the recipient of a life insurance policy or P.O.D. bank account that lists Person A as the beneficiary of the policy or account may not be sufficient to cause the policy or account to be payable to Person A. Upon the death of the policyholder or account owner, the insurance company and/or bank will likely pay the benefit amount to Person A, leaving Person B with the task of showing the will or other estate planning document was meant to change the beneficiary designation (a task that will almost certainly require legal assistance and time to accomplish and ultimately may or may not be successful).
When the Weber Law Office works with a client to create or modify an estate plan, we are careful to identify all of the assets and property you own – probate and non-probate assets – and ensure each item or group of property is handled according to your wishes. Our Wichita Estate Planning Lawyer strives to create peace of mind our clients and their families through a solid and well-drafted estate plan. Let us help you create or review your estate plan: call our office at (316) 265-7802 and speak with us about your estate planning needs today.