The death of a loved one and the administration of his or her estate can bring about extremely emotional and confusing times. Perhaps one of the most confusing facets of estate administration is the determining which assets will be distributed according to your loved one’s Last Will and Testament, and which assets will be distributed outside of your loved one’s estate to previously designated beneficiaries. Understanding probate and non-probate assets in these circumstances is crucial.
Probate vs. Non-Probate Assets: An Example
When examining this oft-asked question, it is easiest to consider an everyday example: Bill Smith is married to his wife, Patty Smith and they have two children, John and Sally. In Bill’s Last Will and Testament, he states that all of his assets shall be distributed to his wife, Patty. Upon his death, Bill Smith has the following assets:
Probate assets are those assets that are to be distributed pursuant to the wishes that are outlined in your loved one’s Will.
Quite simply, probate assets are those accounts that are held in your loved one’s name alone and have no designated beneficiary on file. Looking to our example above, our initial probate asset would be the brokerage account. This account was registered and held in Bill’s name alone as there were no joint owners and/or beneficiaries designated on said account. As a result, the proceeds of this account will eventually be paid to Bill’s surviving spouse, Patty pursuant to the wishes outlined in Bill’s Last Will and Testament.
Non-Probate assets are assets that are not distributed pursuant to the wishes in your loved one’s Last Will and Testament.
Non-Probate assets are not distributed based upon the wishes set forth in your loved one’s Will because they already have designated beneficiaries on file with each respective financial institution. As outlined above, the checking account that Bill holds at the bank lists both Bill and John as joint owners of the account. As a result, when Bill passes away, said account (and the monies contained therein) automatically become John’s and John’s alone. In further example, Bill also has a MetLife Insurance Policy that names John and his sister, Sally, as equal beneficiaries of same. As a result, once Bill passes away, John and Sally (who were named as the beneficiaries of that account) are now entitled to equally split the insurance proceeds. This same logic also applies to other accounts that may contain a beneficiary designation (i.e. individual retirement accounts, annuities, etc.).
In short, if an asset has a joint owner or is payable to a named, living beneficiary upon death, said asset is a non-probate asset that will be paid directly to the joint owner and/or the named beneficiary. If the asset was owned individually (with no joint owner) or is payable to a named, non-living beneficiary upon death, said account is a probate asset that will be distributed pursuant to the wishes outlined in your loved one’s Last Will and Testament.
Determining and setting for an estate plan can give you peace of mind. Here at Restaino Reddien, we are proud to help families across Niagara Falls and Western New York protect their assets and their families, and gain critical peace of mind. Call us at (716) 235-5885 with any questions or to make an appointment for your free consultation.
Related Topics: Estate Planning