Estate Plan Check-Up 10: Probate Assets and Non-Probate Assets

By Deirdre R. Wheatley-Liss, LL.M, CELA and Crystal West Edwards, Esq., CELA

There's a misconception out there that if you have a will, it controls what happens to all of your assets. But that’s actually not true. Legally speaking, there are two kinds of assets: probate assets and non-probate assets.

Probate assets are controlled by wills, non-probate assets are not.

Non-probate assets can consist of joint accounts or other property that is jointly owned, as well as assets with a named beneficiary, such as life insurance or retirement benefits.

Example. Let’s say the two of us, Deirdre and Crystal, own a vacation home jointly with rights of survivorship. When one of us passes away, the other would be the sole beneficiary or the sole owner of that property.

Is that really what we intended or did one of us want her share to go to a spouse or other family member?

Or if the two of us have a joint checking account and one of us dies, the surviving owner would be the owner of the other’s interest in that account. Is that really what we intended?

In New Jersey, the presumption is that if you have a joint account or a joint ownership designation, you intend for the surviving joint owner to receive that money or property. But that may not be the case. It’s possible to rebut that presumption in a court proceeding, but it’s much easier to handle by having your documents up to date, clearly expressing your intent.

It is important, too, as part of your estate plan check-up, to make a decision as to whether or not a joint designation is appropriate or some other type of ownership structure, such as a sole ownership with a power of attorney, would be better. 

Life Insurance. Insurance proceeds as well as retirement accounts have a beneficiary designation that's associated with them. Whomever has been appointed or is named as the beneficiary is the person who's going to inherit that property, regardless of what your will says.

Example. A younger couple has children under 18 that they don't want to receive a significant amount of assets outright. They have a life insurance policy with a $500,000 death benefit. Their will says that any share of that benefit that goes to a child under the age of 25 is going to be held in a trust. That will not happen, however, unless the beneficiary designation for the insurance policy names the trust as the beneficiary.

It's important to make sure of two things: 

First, it’s important to make sure that your beneficiary designations match your overall intention with respect to your estate plan.

Second, you want to be sure that the ownership structures you have in place are consistent with your intentions, with respect to how assets are to be distributed at your death.

This post is for general informational purposes only. The information provided may or may not apply to you given the specifics of your situation. For a video presentation of this information, please visit Estate Plan Check-up. For more detailed information, please visit www.porzioplanning.com or contact us for a free 20 minute telephone consultation.