Probate versus Non-Probate Assets: What assets actually pass under your Will?
Barring health, tax, or other special circumstances, most clients truly only need a basic estate plan. A basic plan consists of three main documents: The Last Will & Testament, The Durable Power of Attorney, and the Advance Directive/Living Will. While a Power of Attorney is generally only effective while you are alive, the Advance Directive/Living Will addresses end of life issues and the disposition of your earthly remains. The Last Will and Testament is only effective upon the death of the person who made the Will, known as the testator, and sometimes known as a testatrix for a woman. The Will is a private document but upon death is turned over to the Register of Wills to be probated. After death, the Will is available to the public.
Although there is a lot of discussion and focus on Wills, in the modern era it is common for the vast majority of someone’s assets to pass outside of their Will. This is particularly true when a decedent leaves behind a surviving spouse who is a joint owner listed on real estate deeds and bank accounts. So-called non-probate assets pass to recipient(s) through beneficiary designations or by operation of law based upon how the asset was titled. Common examples of non-probate assets include:
- Bank accounts held jointly or those accounts with “transfer on death” or “TOD” or “pay on death” or “POD” designations;
- Real estate titled as tenants by the entirety or joint tenants with right of survivorship;
- Vehicles with a designated beneficiary on file with the MVA; and,
- Investment or retirement accounts with beneficiary designations.
A Will, therefore, only controls the disposition of property not otherwise disposed of by operation of law or beneficiary designation. A properly drafted Will disposes of all of a testator’s property, both real estate and tangible personal property. It can dispose of bank accounts or other assets when those assets are not owned jointly or when assets owned individually do not have a beneficiary designation.
An improperly drafted or executed Will, however, can create unintended results, such as assets passing through the intestate succession laws. An ill-advised testator can also inadvertently fail to leave assets to those named in their Will in favor of those named as beneficiaries on deeds and financial accounts. Therefore, it is critical that an estate plan coordinate non-probate asset transfers with probate assets to ensure that a person’s actual intentions are carried out after death.
As part of the basic estate planning package, you will be able to ask questions about your beneficiary designations on non-probate assets and receive assistance in filling out the forms if requested. Although a “basic” plan might be all that you need, your estate plan should be given the time and consideration it deserves. You will not leave this attorney’s office with lingering questions or doubts. If you have questions about non-probate transfers, please contact us for a consultation.