Certain assets in an estate, known as "nonprobate assets," are transferred after the decedent’s death whether or not there is a Will. Besides nonprobate assets, some contractual arrangements may determine the distribution of an asset. In other words, these types of assets or arrangements avoid probate.
Nonprobate assets
A working definition of "probate assets" can be found in the Washington State statutes (RCW 11.02.005(15)):
“Nonprobate asset” means those rights and interests of a person having beneficial ownership of an asset that pass on the person’s death under a written instrument or arrangement other than the person’s will. “Nonprobate asset” includes, but is not limited to:
- a right or interest passing under a joint tenancy with right of survivorship,
- joint bank account with right of survivorship,
- payable on death or trust bank account,
- transfer on death security or security account,
- deed or conveyance if possession has been postponed until the death of the person,
- trust of which the person is grantor and that becomes effective or irrevocable only upon the person's death,
- community property agreement,
- individual retirement account or bond, or
- note or other contract the payment or performance of which is affected by the death of the person.
For example, assume that Mrs. Smith placed one of her grandchildren, Mary, as the beneficiary of a payable on death bank account. At Mrs. Smith’s passing, Mary would typically be entitled to receive all the funds held in that account.
Contractual arrangements
Another way to avoid probate is to have a contractual agreement that includes how the asset will be distributed upon death. A common example is a life insurance policy. When a person purchases life insurance, he or she normally designates one or more beneficiaries who will receive the death benefit.
Caveat
Nonprobate assets and contractual arrangements are usually convenient ways to transfer property at one's passing. However, there may be other factors that come into play when settling some estates, such as creditor claims and special provisions of a Will. In other words, the settling of the estate may be more complex than what was anticipated.
For example, Mr. Brown has a very simple estate consisting of a checking account, savings account and several certificates of deposit at his local bank. His only son, Bill, is a joint owner with right of survivorship on each account and certificate of deposit. Creditor claims will still have to be dealt with even though there is no probate process.
Contact me if I can be of help with nonprobate assets.