Probate vs Nonprobate Transfers | How Assets Transfer at Death

Probate vs Nonprobate Transfers | How Assets Transfer at Death

• June 19, 2019 - Estate Litigation, Trust Litigation,

Hello, I’m Mike Hackard. I am a California estate and trust litigation lawyer. I began the practice of law in 1976, and I’ve been very active to this day.

I want to discuss how assets pass on after we pass on. We begin by recognizing how different is the part played by our probate courts from that of automatic transfers on death. We can see these differences by telling some stories.

We in the United States have the gift of owning property. We have certain property rights and responsibilities associated with the ownership. For example, if we own a home, we have the responsibility of paying property taxes. We may also have responsibilities to homeowners associations. We own our cars and we also have the responsibility to license them.

It’s pretty obvious that when we pass away, we no longer own any assets. The assets that we owned during life must be transferred to living people or recognizable entities that are owned by living people.

So, let’s assume that Barbara owns a home in Carmel. She owns the home in her own name. Barbara has a will.

The will identifies Barbara’s son, Charlie, as the executor of the will. This means that at Barbara’s passing, Charlie takes over the decision making with regard to Barbara’s home. It is said that Barbara dies testate because she has a will. If she died without a will, her estate would be intestate.

Since the home is in her own name alone, it can’t be transferred by her once she passes away. There is no one to sign the deed. So, her estate representative takes over, the deed to the house is put in the name of Barbara’s estate by court order, and then if the house is sold, Charlie can sign the deed as the executor of Barbara’s estate.

Barbara also owned a number of other assets. She owns a life insurance policy with San Mateo Life Insurance Company. The policy has death benefits of $1 million.

Barbara designates Charlie as the primary beneficiary of the policy. This means that at Barbara’s death, Charlie receives $1 million. Barbara designates Pam, Charlie’s daughter, as the secondary beneficiary of the policy. That means that if Charlie does not survive Barbara, then at Barbara’s death, Pam will receive the $1 million life insurance benefits.

Insurance policies proceeds do not pass through probate. They transfer at death. They are nonprobate transfers. Custodial agreements, deposit agreements, pension plans, individual retirement plans, trust assets, revocable transfer on death deeds, and marital agreements may also transfer on death. That is, the assets transfer out of a court. Other examples of nonprobate transfers include real property held in joint tenancy.

For example, Barbara could hold her Carmel home in joint tenancy with her granddaughter, Pam. At the death of Barbara, the surviving owner, Pat, would receive the entire real estate interest without going through the court probate process.

Trusts may also own assets. Trusts are created by a trustor, settlor or grantor. A trustee and successor trustees are identified in the trust. Trustees administer a trust. Beneficiaries are also named in a trust.

If Barbara had owned her home in a trust, its transfer would not have to go through probate court. The trustee would generally be empowered to transfer the trust to a buyer without the approval of a probate court.

So, when it comes down to it, things that Barbara owned in life could be transferred in a variety of ways after her death. It is certainly preferable that asset transfers occur without rancor or division.

At Hackard Law we focus on contested estate, trusts and probate matters. We take substantial cases where we think that we can make a significant difference and there is a wrongdoer who can be made financially accountable for their wrongdoing.

Sometimes the “wrongdoer” is just someone who doesn’t know their duties and obligations as an executor or trustee. This is why many cases may resolve early. Once a misguided or unguided executor or trustee learns of their mistakes, they may seek a way to resolve differences.

We represent foreign, out-of-state and California clients in probate and civil courts in most of California’s largest population counties. We regularly have cases filed in Los Angeles, Orange, Santa Clara, San Mateo, Alameda, Contra Costa and Sacramento Counties.

If you would like to speak with us about your case, then call us at 916 313-3030. We want to hear your story.