When considering any form of estate planning, it is important to understand the difference between probate and non-probate assets.   Probate assets must go through the Surrogate’s Court process, requiring supervision and approval by the Court in order to use and distribute a decedent’s assets.  When there is a Will (testate), the process is referred to as Probate.  When there is no Will (intestate), the process is referred to as Administration.  Assets that bypass the court process and go directly to your beneficiaries are referred to as non-probate assets.  There are many good reasons to avoid Probate or Administration.

The Probate or Administration process requires the filing a Will (if one exists), appointing an Executor or Administrator (“the fiduciary”), collecting assets, reimbursing administrative and funeral expenses, paying debts, filing taxes, distributing property to beneficiaries and heirs, and filing an accounting with the court. A filing fee must be paid, an attorney will likely need to be retained, and creditors and relatives can file claims, contest the Will, or challenge the actions of the fiduciary.  It will take several months to several years to complete.  The process can be a costly and time-consuming, which is why many people try to avoid probate by having only non-probate assets.  For individuals utilizing Medicaid, be aware that New York State will try to recover the amounts paid for your medical care, but may only do so from probate assets.  At present, Non-probate may not taken to satisfy Medicaid liens.  

Probate assets are any assets that are owned in the decedent’s name alone.  These asset include:

  • Real Property that is titled solely in the decedent’s name or held as a tenant in common
  • Personal property, such as clothes, jewelry, cars, and furniture
  • Bank accounts that are solely in the decedent’s name without named beneficiaries
  • Investments held solely in the decedent’s name without named beneficiaries
  • Business interests in a partnership, corporation, or limited liability company
  • Life insurance policy listing the decedent or the decedent’s estate as the beneficiary

Probate assets may be transformed to Non-probate assets is several different ways.  Examples of Non-Probate assets include:

  • Real or Personal Property that is titled in joint tenancy or as tenancy by the entirety
  • Bank or investment accounts held in joint tenancy or with payable on death (POD) or transfer on death (TOD) beneficiaries
  • Property held in a Trust (revocable or irrevocable)
  • Life insurance that list someone other than the decedent or the decedent’s estate as the beneficiary
  • Retirement accounts with named beneficiaries (401K, IRA, etc.)

When properly planning for the future, you should take into account whether property is probate property or non-probate property. A Will does not control the distribution of non-probate property. Check the ownership of your property, your bank and investment accounts to make sure jointly owned property will be distributed the way you want it to. It is also important to review your beneficiary designations for all other account types.