With limited exceptions (described below), every item of property a person owns — including intangible rights (such as bank accounts, life insurance policies, and annuities) — is classified as either a nonprobate asset or a probate asset. Generally, nonprobate assets are those that will not pass to heirs or beneficiaries during probate, but will instead pass upon a person’s death under a written instrument or arrangement other than the person’s will. (Nonprobate assets given away using a super will are an exception.) According to the statutory definition, nonprobate assets include any interest or rights a person has in:
- property held in joint tenancy with right of survivorship;
- real property conveyed through a transfer on death deed;
- a joint bank account with right of survivorship;
- a payable on death or trust bank account;
- a transfer on death security or security account;
- a deed or conveyance if possession of real property has been postponed until the person’s death (such as real property held as a life estate);
- a trust of which the person is the grantor and which becomes effective or irrevocable only upon the person’s death;
- a community property agreement, individual retirement account or bond, or note or other contract the payment or performance of which is affected by the person’s death.1
Note that the language in the statute that precedes the list above states “‘Nonprobate asset’ includes, but is not limited to.” Therefore, the list provided in the statute is not comprehensive. There are other rights and interests in assets, other than those listed, that can pass upon a person’s death under a written instrument or arrangement other than the person’s will, and those too would be considered nonprobate assets.
The statute also includes a statement of items that are not nonprobate assets even though they may appear to be. Those items that are not nonprobate assets include:
- a payable-on-death provision of a life insurance policy, annuity, or other similar contract, or of an employee benefit plan;
- a right or interest if, before death, the person has irrevocably transferred the right or interest, the person has waived the power to transfer it or, in the case of contractual arrangement, the person has waived the unilateral right to rescind or modify the arrangement; or
- a right or interest held by the person solely in a fiduciary capacity.
The second and third bullet points are fairly intuitive; they describe rights or interests that will not be transferred under any arrangement upon a person’s death, either because the person no longer owns them or because the rights disappear upon the person’s death. The first bullet point, however, leads to confusion because interests and rights in a payable-on-death provision of a life insurance policy, annuity, or other similar contract, or of an employee benefit plan, do pass under a written instrument other than a will. Though by statute these assets are not considered nonprobate assets, they are not probate assets either. If you are drafting your own simple will using instructions on this website, do not get hung up on the distinction. These assets which are neither probate assets nor nonprobate assets (we’ll call them “not-probate assets”) will not pass under a will, and, just like nonprobate assets, they should be left out of a will.
The bottom line is that the transfer of nonprobate assets and not-probate assets are not handled in a will, so it is crucial that a testator take steps beyond just making a will to control how these assets will be distributed upon the testator’s death. A testator should keep his or her beneficiary designations on life insurance policies, payable on death bank accounts, etc., up-to-date, and should make other arrangements, as appropriate, for nonprobate assets that will transfer by some method other than using a beneficiary designation. This website does not provide information or instructions on how to update beneficiary designations or otherwise control the disposition of nonprobate (and not-probate) assets. It is your responsibility to ensure that your beneficiary designations are correct and current at all times.
If you are unsure of whether a right, interest, or other asset you have is a nonprobate or not-probate asset, or if you are unsure of how to control the disposition of a nonprobate or not-probate asset upon your death, we strongly recommend that you seek the advice of an estate planning attorney.