There is a lot of confusion surrounding a probate court process including the costs, time spent, and whether one can avoid it. Understanding the basics can help remove some of the confusion. A non-probate asset is one where there is a beneficiary or a joint tenancy with the right of survivorship. In a probate asset, the property is held in the decedent’s name alone, and there is no designation for a beneficiary.
If you are looking for a lawyer to handle your case, Geoffrey Dietrich will be willing to answer any questions that you might have about protecting your assets. Note that probate assets will have to pass through a probate court before they are distributed according to the will of the decedent. That said, here is how the two work in different contexts:
No type of non-probate assets is as loved as joint property. Typically, such assets will pass from the owner to the remaining co-owner without regard to their will. However, the joint property has some inherent problems. Consider a widow who leaves their property to two of her children, dividing her estate equally. Imagine that health concerns lead her to keep her accounts jointly with a daughter who provides care. When she passes on, these accounts typically go to her daughter, and so she gets a more significant share. If the daughter refuses to share the accounts because she feels that she has earned ownership due to the care she provided, a son may decide to fight her in court. A better approach is for the widow to give the daughter a power of attorney to use should disease strike.
This is also a common non-probate asset. In this case, the proceeds will be paid based on a contract to a chosen beneficiary, disregarding the will. Like with joint property, problems may come up. Imagine a husband who forms a trust and funds it with $500,000 to give his wife income. This money will also not be taxed as part of the husband’s estate since federal estate taxes do not target unified credit. The money is meant to get to children untaxed.
Should the husband forget to name “my estate” as his insurance beneficiary, when he dies, the money he owned with the wife becomes part of his assets together with the life insurance the wife gets and other assets. All these get to the wife. Wives often fail to disclaim the insurance money, and the $500,000 that could go to the trust would get lost. When she dies, the money is also taxed unnecessarily.
People use trusts as a substitute for a will. However, a taxable estate will include the trust that has been created for someone else’s benefit. One must coordinate their estate plan and the trust.
Estate planning will go beyond creating a will. One must think about their property, contractual provisions, potential taxes, and the value and title of the property. When deciding who benefits from your estate and how much, consider your non-probate and probate assets and reconcile them with your trust.