Non-Probate Assets and Will-Making

Many people believe that upon making a Will, they now have an up-to-date plan for distribution of all property after death.  That’s true–but only for assets that the Will actually controls.

A Will only controls “probate” assets.  A Will does not control “non-probate” assets.  Non-probate assets are assets that transfer after the owner’s death according to the laws of contract, such as a valid survivorship or beneficiary designation. 

An example of a survivorship designation is a jointly owned bank account with “right of survivorship.”  Upon proof of death, the surviving joint owner gains title to the whole account without regard for what the deceased owner’s Will might say.  An example of a beneficiary designation is life insurance.  Upon proof of death, the company pays the policy amount to the named beneficiary. 

But that’s not the end of the story.  It is possible for what are normally “non-probate” assets to become probate assets.  This transformation would occur under the following non-exhaustive list of circumstances: (1) the deceased’s estate is named as beneficiary (i.e. John Smith’s life insurance policy names “The Estate of John Smith” as beneficiary); (2) all primary and alternate beneficiaries predecease the insured;or, (3) a joint account has no right of survivorship provision and no pay-on-death designation.

The moral of the story is that updating your estate plan involves more than just updating your Will.  It is wise to review the status of probate and non-probate assets in order to make deliberate choices.  Either bring certain non-probate assets under the control of your Will or validate/update the applicable survivorship or beneficiary designations so your intent will be met.

Author Jim Cramp is the founder and principal attorney at the Cramp Law Firm.  The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.