Talking About . . . Probate vs. Non-Probate Transfers

Video

Hi folks. We’re back. I’m Andy Stautz for Stautz Law, and today we’re having a quick chat about probate versus non probate transfers. And for many clients and many estate planners, probate avoidance is a big part of the job.

Probate is the court supervised distribution of property after someone’s death. It’s a good thing to have around because it ensures . . . everything’s orderly. Creditors get paid, the right people get the property. But it has to be formal and formal means expensive, and slow, and public. So. It behooves you to know what of your property is subject to probate and what isn’t.

Because a key piece of crafting a probate avoidance plan is to to move assets from from probate assets to become non probate assets, or to move transfers from being probate transfers to non probate.

So there are a couple main types of non probate transfers. Umm. And they’re easiest to understand if you understand what they’re not.

Probate is designed to take care of everything you, like, just you, own at the time of your death. So a house that you own outright, your clothes, the money in your bank account, your car. Whether or not there’s a title, right? So you’ve got a name on a deed, and you’ve got a title for your car. You don’t have a title for you. You know your your law school, sweatshirt or. I mean it’s, but it’s still yours. So it’s still a probate asset.

Non probate assets and non probate transfers are things that aren’t just yours. So there are kind of three main categories.

One would be joint ownership. So if you and your spouse are joint owners of a piece of real estate. And your spouse has a right of survivorship. Then when you die, the house doesn’t go through probate because your spouse, the other joint owner, is there to take it, and it happens right away automatically.

Umm, the other, the second category is beneficiary designations of various sorts, and these work kind of the same way in that they are automatic ways to pass property to. Sub. Some specific other person. Unlike joint ownership, your beneficiaries don’t have rights in the property right away. So examples payable on death designation on a bank account. Beneficiary designation on a life insurance policy. Beneficiary designation on your retirement accounts and transfer on death deeds for real property like your house.

So just because your child is named on your transfer on death deed or your child is the beneficiary of your retirement account doesn’t mean that they have any power over the money in the account right now. Or over the house right now. Otherwise, though, just like joint ownership. It happens automatically, so you don’t have to go to the probate court and say please can I transfer this retirement account please? I transfer this. The life insurance policy proceeds. They just boom. Which is very convenient because it’s fast.

Now the danger is you’d forget to update your beneficiaries or you know. They’re wrong somehow. And one child ends up getting everything and not the others. So you have to, you have to keep an eye on them and you should talk to an estate planning attorney like me. To make sure they’re part of your overall estate plan. But they’re a powerful tool and relatively simple because you don’t need special documents (with the exception of transfer on death deeds, I suppose) to effectuate them.

3rd category is very much formal estate — You know, sophisticated techniques — and that’s property that you have in trust. And a trust is a legal fiction designed precisely to separate, you know, use and benefit from a piece of property and like actual legal ownership of the property. So done. You can have. That’s yours in every meaningful way. But isn’t yours for the purpose of the probate court? Like I said, kind of a legal fiction, very technical. You almost certainly need, you know, professional legal help to get a trust set up for you. But that’s one of the most powerful techniques in our toolbox as estate planners because of the sheer variety. I mean you can craft a trust for almost anything.

So those are kind of the three categories. To recap, you know joint ownership, beneficiary designations, and trusts.

If you set your initial planning meeting with me, we’ll talk about your situation and make sure all of those techniques. Work together, or which ones to use, how they should work together to make sure that your plan works according to plan. And that’s my skill set. So I’d love to help you out. But that was just a general background. Call me or set your meeting for specific legal advice and I look forward to working with you soon. Bye now.