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Probate v. Nonprobate Property 101

By Christina T. Vidoli

Oddly, while there are many laws and court cases about “probate” property, most property today is “nonprobate” and passes at death without court supervision.  Nonprobate property includes the following types of property:

            Property with Beneficiary Designations, such as life insurance and retirement assets (like 401(k)s and IRAs) is property, which is in effect a contract between you and your insurance company or retirement custodian, passes to the individual or individuals that you list on the company’s beneficiary designation forms.  It is important to review these every so often to ensure your beneficiary designation is not out of date.

            Property Owned in Trust, such as property in a living trust, revocable trust, or land trust is property in effect a contract between the creator of the trust and the trustee.  Often the trustee is also the creator of the trust.  The trust property will pass according to the terms of the trust.  Avoiding probate is just one of the many benefits of holding one’s property in trust.       

            Jointly-Owned Property, such as property owned as joint tenants with rights of survivorship or as tenants by the entirety, passes to the surviving tenant by operation of law immediately upon the death of the first tenant.

Understanding the distinction between probate and nonprobate property can be crucial in making sure your estate goes to who you want.  I had a case involving a woman who held property jointly with her sister.  Her will left her interest in the property to her daughter, but that provision was ineffective and trumped by the fact that she had already converted the property to nonprobate property during her life.   Despite what the will said, the house went to her sister, not her daughter.

Avoiding probate saves a decedent’s family members the cost and hassle of having to go through the probate court to distribute assets and settle the estate.  It also provides privacy in settling the decedent’s final affairs because anything filed at the probate court is public record.  But, beneficiary designations are often made without the thought and consideration going into a will and sometimes are inconsistent with other parts of estate plans.  It’s important to speak with an estate planning attorney if you seek to avoid probate in order to ensure your final wishes will be realized.   In some cases, having the court’s oversight may provide welcome protections to both beneficiaries and those responsible for settling a loved one’s estate.

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