Determining the Property of the Estate
When someone dies, a new entity is formed called an “estate”. The estate is composed of everything the deceased person “owned or owed” at the time of his/her death.
An “estate” contains two types of property:
(1) Non-probate property: Property where a a beneficiary was named or designated that passes directly to that beneficiary without court intervention; and
(2) Probate property: Property which does not have a beneficiary named or designated, which is known as the “probate estate” and passes pursuant to the directions in the Last Will and Testament of the deceased, or, if he/she did not have a Will, pursuant to the laws of the deceased’s last state of residence.
No matter what type of property is in the estate, probate or non-probate, both require that certain steps be taken to transfer the property to the correct people.
The non-probate estate is governed by beneficiary designation forms or is any property that is jointly held. Examples of this would be beneficiaries listed on retirement accounts and/or life insurance policies, or a joint bank account or home owned by a husband and wife. The non-probate estate passes directly to that named beneficiary or surviving joint account holder, NO MATTER WHAT THE WILL SAYS.
Example: Peter owns one retirement account at the time of his death. Peter originally named his son Jake as the beneficiary prior to Jake’s brother, Josh, being born. Peter updated his will after Josh’s birth and he states that his property passes to both of his sons, Jake and Josh, in equal shares. However, because a retirement account, has a named beneficiary then Jake still gets 100% of the account, and Josh gets nothing because the beneficiary designation of the retirement account overruled the will.
The probate estate is governed by the directions in the Will, or, if the deceased person did not have a Will, under the laws of the deceased’s state of residence. The probate estate must also go through the probate process, which may differ from state to state and involves filing paperwork with the county surrogate's court.
Example: Peter owns one retirement account at the time of his death and he did not name anyone as the beneficiary. The retirement account is not considered a probate assets and passes pursuant to the directions in his will, which states his sons, Jake and Josh, will receive a 50/50 split of his assets.