Can non-probate assets get caught up in a probate dispute?

On behalf of Scaringi Law posted in Estate Planning on Monday, June 15, 2015.

Why does probate take so long? One reason is that the probate court wants to ensure that creditors are afforded an opportunity to make any claims against the estate. Those creditors that fail to file a claim after receiving notice may be barred from further collection efforts. Assets must also be inventoried and valued.

However, estate law excludes certain types of assets from probate. Assets in a trust, contractual accounts payable to a named beneficiary, and property that is jointly owned with a right of survivorship often bypasses probate. For that reason, trusts can be a smart strategy for avoiding probate.

However, our law office offers a word of caution about non-probate assets: They can be overlooked when an individual is preparing his or her last will and testament. In addition, statements in a will about non-probate property may have no legal effect. Non-probate assets typically have their own procedural requirements, and beneficiaries must be updated following the account procedures. In the case of a trust's principal, assets generally must be specifically transferred to the trust. When those procedures are ignored, a probate dispute may arise, as in today's story.

According to accounts, an individual attempted to transfer property to his revocable trust using just a boilerplate reference in the trust instrument. The statement referenced all of the man's personal and real property, and apparently was meant to include two separate real estate parcels. Unfortunately, the man failed to retitle that real estate parcels in the name of the revocable trust. After his death, the successor trustee sought court confirmation that the transfers had been effective. Although the outcome might have been unsuccessful in many other courts, the court in this particular example upheld the transfers.

Source: Wealth Management, "Court Approves Easy Probate Avoidance for Real Estate," Gregory Monday, June 1, 2015


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