Probate vs Non-Probate Assets for Wills

Question

New York State (USA) here. I'm having trouble understanding the difference between Probate and Non-Probate assets, from a Will/Testament standpoint.

I believe non-probate assets are specific gifts you call out -- in the Will -- that are designated for specific beneficiaries. Little Jimmy gets the old pair of lucky Yankees socks, Little Suzie gets the old, decrepit, half-eaten turkey sandwich that Babe Ruth once took a bite out of, etc.

I believe probate assets are simply anything you (the Deceased; the Testator) owns prior to death that is not specifically called out as a non-probate asset and designated to a specific beneficiary.

If that's right, then I'm guessing things like:

• 401ks/Roth IRAs
• Life Insurance policies
• Savings accounts
• Stock market investments
• Houses, land & real property

...could all be probate assets if one does't specifically gift them to a Beneficiary?

And if my understanding is incorrect, then I could use some course correction and steering here. Thanks in advance!

Answer 1

I believe non-probate assets are specific gifts you call out -- in the Will -- that are designated for specific beneficiaries. Little Jimmy gets the old pair of lucky Yankees socks, Little Suzie gets the old, decrepit, half-eaten turkey sandwich that Babe Ruth once took a bite out of, etc.

This is incorrect. Every transfer arising from a will is a probate asset, because probate is the formal legal process of determining if there was a will, and if so, which will applies, and then distributing the assets of the person who died in accordance with that will (or with the determination that there was no will).

I'm guessing things like:

401ks/Roth IRAs

Life Insurance policies

Savings accounts

Stock market

investments

Houses, land & real property ...could all be probate assets if one does't specifically gift them to a Beneficiary?

A 401k/Roth IRA with a beneficiary designation (other than the owner's estate), a life insurance policy with a beneficiary designation (other than the owner's estate), a savings account or stock account or investment with a joint owner or a pay on death beneficiary (other than the owner's estate), or real property with a transfer on death beneficiary or a joint ownership with right of survivorship is a non-probate asset.

Any of those assets if there is no beneficiary designation, if there is no pay on death beneficiary, if there is no joint owner with right of survivorship, if it is not owner through a trust, and if there is a beneficiary designation that names the owner's estate, is a probate asset.

The General Rule

Anything subject to allocation and distribution in a will, or by intestate succession is a probate asset. Specifically devised property in a will is a probate asset.

A non-probate assets is something transferred pursuant to a beneficiary designation, pay on death provision, joint ownership with right of survivorship, tenancy by entireties, or provision in a trust existing prior to the death of the decedent. These assets are not dealt with through the probate court process.

However, if a will purports to specifically devise property that has a beneficiary designation or pay on death beneficiary or is owned by a trust or is in joint tenancy with right of survivorship, then the non-probate transfer prevails over the inconsistent language in the will.

See also:

Examples of Non-Probate Transfers Used in Estate Planning

The following are examples of non-probate transfers commonly used in estate planning:

1. Passing property to beneficiaries through a living trust.

2. Leaving funds to a beneficiary named on a pay on death account or transfer on death account.

3. Leaving funds to a beneficiary named on a life insurance policy.

4. Leaving funds to a beneficiary named on an IRA, 401k or other retirement account. See financial planning.

5. Holding title to property as joint tenants or tenancy by the entirety.

6. Leaving motor vehicles to a transfer on death beneficiary.

7. Gifting assets to heirs during your lifetime so the assets do not pass as part of your estate.

8. Executing and recording a transfer on death deed naming a beneficiary to inherit your real estate.

(Source)

The American Bar Association devotes a full chapter length treatment to discussing the difference. It begins:

Upon death, a decedent’s estate includes both probate and nonprobate assets. Probate assets are those that pass to persons identified in a will (see Chapter 3 for a discussion of wills), whereas nonprobate assets pass outside an estate’s administration. Examples of traditional nonprobate assets include qualified and nonqualified retirement plans, individual retirement accounts, and life insurance policies. However, nonprobate assets can also include certain checking and savings accounts, certificates of deposit, investments, and even real property, but only if a beneficiary is designated and state law allows for such an asset to pass outside of an estate’s administration. Nonprobate assets are frequently referred to as “will substitutes.”

Answer 2

You could read this page. The main point is that probate assets are those owned individually by the decedent, and do not have a survivorship right or named beneficiary. Non-probate assets are those with rights of survivorship or a beneficiary designation. Examples of the latter: multiple individuals as joint tenants with rights of survivorship, or held as tenants by the entirety; joint bank accounts; life insurance or retirement benefits with a named beneficiary; property held in the name of a trust. Retirement benefits, bank accounts, real property etc. can also be a probate estate.