Nonprobate assets do not get distributed at a testator’s death through use of a will. Instead, these items automatically transfer to whomever survives the decedent without use of probate. Nonprobate assets are transferred at death regardless of the testator’s will, or the transference is established during the life of the decedent. For example, when a man and his wife own a piece of property together, the property automatically goes to the surviving spouse and no distribution of that property is needed. How is this beneficial?
First, there is no probate waiting time. Waiting for an executor to distribute a will can take months to years, and in the nonprobate transfer situation, the assets are automatically transferred to the new person. Additionally, without probate, there is no interruption of privacy for the testator or the beneficiary. Also, there are limited amounts of money and paperwork going into making a nonprobate transfer happen, whereas going through probate court would produce much expense and much paperwork. If a decedent has assets that are going to go through probate in addition to some that are not, it is necessary for the attorney to have a firm grasp on which is which to make the overall estate plan beneficial to the decedent and subsequent owners in terms of taxes, etc.
Examples of nonprobate assets are property owned in a tenancy by the entirety by spouses or a joint tenancy with a right of survivorship; these two situations are similar where there is a property owned by two individuals and when one dies, and the other survives him or her, the other gets full possession of the property. Another example of a nonprobate asset is life insurance. The benefits of life insurance after the main insured dies go automatically to beneficiaries without the burden of probate. Similarly, retirement money is a nonprobate asset to the decedent; it is important to add the retirement plan into the overall estate plan. A life estate and an inter vivos trust also fall into the category of nonprobate assets as a result of their automatic transfer after the death of the decedent. Both probate and nonprobate assets are subject to taxation. For example, when a decedent’s total estate is more than $600,000, a federal estate tax return must be filed with all nonprobate assets on the return.