Probate vs. Non-Probate Assets

Probate assets are those assets of a decedent that become the property of the estate of a decedent and subject to distribution to the beneficiaries of the estate under the terms of the decedent’s will or the state intestacy statute.  Non-probate assets are those assets that are not a part of the estate subject to distribution because they automatically pass to another by law upon the death of a decedent or have already passed to another prior to the decedent’s death.

 

Non-probate assets might include the following:

1.  Assets a decedent owned jointly with another with rights of survivorship.  Upon the passing of the decedent, these assets pass automatically to the other owners by operation of law.

 

2.  Assets a decedent owned jointly with his/her spouse as tenants by the entirety.

 

3.  Assets that a decedent previously titled to a revocable living trust or other entity.  Since the asset is not in his/her name at the time of death, it is not subject to probate.

 

4.  Assets in which a decedent transferred to another while retaining a life estate.  Upon the death of the decedent, the life estate expires by operation of law and the remainder interest passes automatically to the previously designated remaindermen (an individual or entity other than the decedent).

 

5.  Assets owned by a decedent, but payable to a designated beneficiary (provided such designated beneficiary has not predeceased the decedent) upon the death of the decedent.  Such assets might include: payable on death (“POD”) accounts, transfer on death (“TOD”) accounts, in trust for (“ITF”) accounts, Totten trusts, life insurance policies, retirement accounts, annuities, or health savings accounts.

 

When dealing with assets of an estate or of a decedent, the determination of whether the assets are probate or non-probate assets is
the first question.  The classification of the asset as a probate or non-probate asset will determine which assets are subject to a probate or administration proceeding and distribution under the decedent’s last will and testament or under the state intestacy statute.

 

The next question, which goes more toward taxation of the estate goes to the value of the gross estate.  While non-probate assets may not be a part of a probate proceeding, they will most certainly be included in the value of a decedent’s gross estate in order to determine the tax liability of the estate.  In a future post, the value of such non-probate assets to be included in the gross estate for tax purposes will be discussed.

 

James E. Clark is a New York estate attorney. For more information on the process of settling an estate in New York, the probate or administration process, or ways to plan an estate to avoid probate or other will, trust or estate settlement matter please visit our website at bfclaws.com, call my office at 631-539-8889 during regular business hours or feel free to e-mail me at JClark@bfclaws.com.

Legal disclaimer: IMPORTANT LEGAL NOTICE: This post is not legal advice does not create an attorney-client relationship. This and all posts on this website are intended as general information and are provided for educational purposes of the public, not any specific individual. If you would like to obtain specific legal advice about this issue, please contact an attorney in your state. Mr. Clark is licensed to practice law in New York.

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