Also known as: nonprobate asset · non-probate assets · non-probate asset · nonprobate property · assets passing outside probate
Written by attorneys — see sources below.
An interest in property that passes outside the decedent's probate estate directly to a designated beneficiary by operation of law or contract upon the decedent's death.
Nina Nielsen and Nikhil Narayan held their home as tenants by the entirety. Nina executed a will attempting to leave her interest in the home to her nephew. Nina died while still married to Nikhil with the tenancy intact. Title passed directly to Nikhil by operation of law.
Norman Nash named his wife Nalini Narula as beneficiary on a life insurance policy. After their divorce became final, Norman died without changing the designation. The proceeds passed directly to Nalini under the policy contract rather than through Norman's estate.
Donna Rae Egelhoff was married to David A. Egelhoff. Mr. Egelhoff was employed by the Boeing Company, which provided him with a life insurance policy and a pension plan. Both plans were governed by ERISA, and Mr. Egelhoff designated his wife as the beneficiary under both. In April 1994, the Egelhoffs divorced. Just over two months later, Mr. Egelhoff died intestate following an automobile accident. At that time, Mrs. Egelhoff remained the listed beneficiary under both the life insurance policy and the pension plan. The life insurance proceeds, totaling $46,000, were paid to her. Respondents Samantha and David Egelhoff, Mr. Egelhoff's children by a previous marriage, are his statutory heirs under state law. They sued petitioner in Washington state court to recover the life insurance proceeds. In a separate action, respondents also sued to recover the pension plan benefits. The trial courts, concluding that both the insurance policy and the pension plan "should be administered in accordance" with ERISA, granted summary judgment to petitioner in both cases. The Washington Court of Appeals consolidated the cases and reversed. Applying the statute, it held that respondents were entitled to the proceeds of both the insurance policy and the pension plan. The Supreme Court of Washington affirmed. Courts have disagreed about whether statutes like that of Washington are pre-empted by ERISA. The Supreme Court granted certiorari to resolve the conflict.
View caseA will has no effect on nonprobate assets. These interests pass by operation of law or contract to the designated beneficiary at death.
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Some state statutes include specified nonprobate assets in the augmented estate against which the surviving spouse may elect. The fraction is applied to the combined value of probate and qualifying nonprobate property.
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Traditional rules often shielded nonprobate assets from creditors. Modern statutes in many states now permit creditors to reach certain nonprobate transfers when the probate estate is insufficient.
Nonprobate transfers that are includible in the taxable estate are subject to federal estate tax. Liability is equitably apportioned among recipients unless the will provides otherwise.
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…decree of dissolution or declaration of invalidity.” Wash. Rev. Code § 11.07.010(2)(a) (1994). That statute applies to “all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity.” § 11.07.010(1). It defines…