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When someone dies owning real or personal property which does not pass by operation of law or beneficiary designation, it is necessary to administer that property. If the decedent held all of his or her property in a Revocable Living Trust, there may not be an estate to administer, simply because there was no property owned by the decedent. Property passing by operation of law includes the "non probate" property listed below.
What is Intestacy?
Intestacy means dying without a Will. All states provide for who will be entitled to your property if you die without a valid will. If you do not make a Will you give up the right to decide to whom you will leave what, and who will act as your representative(s). The state laws will rarely match your wishes.
If you die intestate (without a Will), the court will appoint an "Administrator" or a "Personal Representative"to do the things that an "Executor" or the "Personal Representative" you named would do for you if you had a Will (see below). You will not have any input into who this person will be. The cost of an Administration Proceeding will roughly parallel the cost of a Will Probate, but be somewhat more expensive because the Administrator will have to post a bond to ensure their faithful performance. 1 When you make a Will, you will probably want to provide that your Executor serve without having to post a bond. The elimination of this one expense can more than pay for the cost of having a lawyer prepare an Estate Plan for you.
What is Probate?
Probate means taking the original Will to the courthouse and filing it. "Probate property" refers to the property that passes in accordance with the Will. Probate property includes all assets in your name (or the portion of joint property belonging to you which does not pass by operation of law in the event of your death or for which you have not named a beneficiary to succeed to your interest in the event of your death). Please note that there is an exception for certain forms of ownership of real estate. "Non-Probate Property" is property that is not controlled by your will, and we therefore say it "passes outside" your Will.
Typical property that is "non-probate" is:
- Life Insurance proceeds paid to a beneficiary
- Various types of pensions
- Profit Sharing, 401K, Keough and IRA accounts where you name a beneficiary
- Bank accounts denominated "pay on death" or "in trust for" or held jointly with a right of survivorship (see below)
- Uniform Gift to Minors act accounts
- Assets held by inter-vivos (created outside of your will) trusts
- Homestead property (this concept is applicable in Florida; neither New York not New Jersey recognizes nor makes provision for "homestead" property.
While "non-probate" assets pass easily to the intended beneficiary, they are still part of your Estate for tax and certain other purposes. Joint bank accounts and stocks and bonds in joint name will be probate property to the extent that they were owned by you. In the absence of proof to the contrary, it will usually be assumed that 50% of a jointly held asset is owned by you. Chances are there will be some assets that will be probate property. It is easier and more cost efficient to have a Will that controls the disposition of as much of your property as possible. If you do any tax planning in your Will, the non-probate assets will escape control of your planning. However, a proper Estate Plan can account for those assets which are "non-probate" so that your taxes are minimized and your assets are left to those whom you intend to have them. If you would like more information, or to schedule a consultation, please contact us.
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If you are a resident of Florida and you appoint a non resident of Florida to be your Personal Representative, the Court has the right to require that a bond be posted and has discretion as to the amount, whether or not you have a Last Will and Testament.