Nonprobate asset

An account example

In Minnesota, for example, a payable on death account transfers its remaining deposits outside probate to payees who survive the original party or last surviving original party. Other states differ.

If multiple payees survive, later survivorship among them exists only when the account or deposit agreement expressly provides for it.

A will specifically referring to the account can change its disposition. The institution is bound only after written notice of the claim and then holds the deposit pending a probate court order.

Court involvement remains possible

In Minnesota, for example, an interested person may petition the district court concerning trust matters specified by the trust statute. Continuing court supervision applies only under the statutory supervision provision or a court order. Other states differ.

Passing outside probate and estate tax are separate questions

Federal gross estate inclusion can apply to life insurance even when proceeds pass to a beneficiary outside probate. It includes insurance on the decedent's life receivable by the executor.

It also includes amounts receivable by other beneficiaries if the decedent held incidents of ownership at death, exercisable alone or with another person.

A reversionary interest counts as an incident of ownership under this rule only if its value exceeded 5% of the policy's value immediately before death. Inclusion does not itself mean estate tax is ultimately payable.

Two related terms

Trust funding concerns placing identifiable property under a trust arrangement, including, in Minnesota, for example, a lifetime transfer to another as trustee or an owner's declaration of holding identifiable property as trustee. Interests outside the express trust and not otherwise disposed of remain in the settlor, and other states differ.

Pour over will means a will leaving probate property to an identified trust with terms in a separate written instrument, which, in Minnesota, for example, may be executed before, with, or after the will and may be unfunded. The property passes through probate into that trust rather than a testamentary trust, and revoking or ending the trust before death makes the gift lapse unless the will says otherwise, while other states differ.

A perspective on ownership and location

"When they have children or grandchildren who are potentially citizens outside of the country or live outside of the country, the need to see things from a global perspective is of high importance and planning around who owns what and where those assets are held."

Common questions