One of the things a Los Angeles probate lawyer can help you understand is the difference between probate and non-probate assets. Probate refers to legal proceedings through which a court decides how to distribute your property upon your death. Who receives those assets depends on the type of property being distributed. Probate assets are distributed to heirs by the court and non-probate assets bypass the court process by going directly to your beneficiaries.
What type of property is considered probate assets?
Generally speaking, probate assets are those that are owned individually and not covered by any type of contract. Depending on the situation, this could include bank accounts and other individually held financial assets. Probate assets may also include personal property such as jewelry, artwork, furniture, cars, property in only the decedent’s name, and/or certain types of property interests. Although jointly-held assets are typically not considered probate assets, there are certain situations where these types of assets are held only by one individual and may still be subject to probate.
What are examples of non-probate assets?
Non-probate assets are basically any assets that either involve mutual ownership or are covered by the terms of a contract. Non-probate assets also include assets that designate a beneficiary, such as jointly-owned real estate, retirement accounts, and life insurance policies.
For example, when you take out an insurance policy you are required to name a beneficiary and, in some cases, a secondary beneficiary. Upon your death, this type of insurance policy will be distributed according to the wishes you have expressed in nominating a beneficiary and, if applicable, a secondary beneficiary. It is always a good idea to make sure that companies in charge of handling these types of assets have accurate, up-to-date records that correctly express your wishes because attempting to distribute these assets in your will in a way that differs from how they are to be contractually distributed will often not override the contractual obligations under law.
Estate assets can be transferred by operation of law
California has established by statute, a set of rules known as the California Multi-Party Account Laws. These rules govern who owns the funds that remain in a bank account, upon the death of the bank account holder. The decedent’s share of the funds will pass according to the terms of the contract with the bank, or by operation of law to certain survivors. Once a death certificate is presented to the bank, a new account is opened in the name of the survivor. In this situation, probate is not required.
Transfer of an estate by right of survivorship
In cases where two individuals hold title to property in “joint tenancy” then they have designated themselves as the individuals who will have full ownership upon the death of the other. This is referred to as the “right of survivorship.” Married couples in California may also hold property as community property with right of survivorship. Unlike joint tenancy, community property without the specific designation “by right of survivorship,” does not pass by survivorship. Instead, it is controlled by the decedent’s will. The right of survivorship applies to both real and personal property. However, it does not apply to bank accounts, which are instead governed by the Multi-Party Account Laws discussed above.
Transfer of property by designation of beneficiary
In California, there is also a statute that provides the Nonprobate Transfer Rules. This is where transfers by beneficiary designation are authorized. The most common types of beneficiary designation transfers are life insurance policies and retirement accounts. Upon the death of the insured or the employee, the funds in these types of accounts will pass to the person designated as the beneficiary. The Nonprobate Transfer Rules also govern Transfer on Death (TOD) and Pay on Death (POD) securities.
Estate assets can be transferred by trust agreement
Assets that you have transferred to a trust will be able to avoid the probate process. With a trust agreement, your property is transferred to the name of the trust, to ultimately be transferred to the named beneficiary after your death. The trustee is the person who manages the property until that time. Traditionally, the trustee had to be a third-party. However, the law has changed over the years and the person creating the trust can now also serve as the initial trustee, at least until their death.
Download a FREE estate planning worksheet today! If you have questions regarding probate property or any other probate issues, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.
- How Can an Incentive Trust Help Me Achieve My Estate Planning Goals? - September 4, 2023
- How Do I Prove Undue Influence in a California Will Contest? - September 2, 2023
- National Make-a-Will Month - September 1, 2023
