Probate is the legal procedure your estate goes through after you pass away. During this legal proceeding, a court will oversee the process of appointing someone to be in charge (known as the “personal representative”), ensure creditors of the decedent who file timely claims are paid and supervise the distribution of assets of the estate to the proper heirs or beneficiaries.
However, some are nonprobate assets and aren’t subject to probate administration.
What Are Some Examples of Non-probate Assets?
Non-probate assets differ because they have a beneficiary designation. For example, the assets may be Payable on Death Bank Account. In Nevada, a bank account can be designated as “payable-on-death”.
This means that when you die, the designated beneficiary can retrieve the money from the institution without probate. Other types of non-probate assets with beneficiary designations include life insurance, IRAs, 401(k)s, and annuities.
It is important to ensure that these designations are kept current or the asset may be subject to probate administration. For example, assume a married couple, or registered domestic partners, have separate life insurance policies that only name each other as a beneficiary and the spouse or partner doesn’t survive the owner of the policy.
Unless the policyholder has identified an alternate beneficiary, the policy will have to be included in the probate at the death of the survivor.
What is a Revocable Living Trust?
A revocable living trust is one of the most common ways to avoid probate and acts as a “will substitute”.
A trust is created by writing a trust agreement. The agreement involves three primary parties – the grantor or settlor (the person who creates the trust; the trustee (the person who manages the trust), and the beneficiary (the person who benefits from the trust).
The key to trust assets avoiding the probate process is that they must have been transferred into the trust (known as “funding”).
How To Deal With Tricky Assets?
Some banks in Nevada require you to close the account that is titled in your own name and open a new account in the name of the Trust. This can be a hassle if you have automatic payments or deposits associated with the account. In those instances, we suggest making a payable on death designation on the account and identifying the Trust as the beneficiary.
Moreover, many credit unions won’t permit a trust to own the account nor will they permit a payable on death designation. In those instances, don’t forget that the account will be deemed a probate asset; however, if you maintain a balance under $25,000, your heir or beneficiary can use a “small estate affidavit” and avoid the probate process.
How to Address Liability Issues?
The transferee of non-probate assets is liable to the probate estate of the decedent for allowed claims against that decedent’s probate estate to the extent the estate is insufficient to satisfy those claims.
However, if there is no probate proceeding, a civil action may be filed by the creditor to recover the amount within one year of the decedent’s death.
This period expands to three years as to the recovery of benefits paid by Medicaid. As a result, be careful about spending the monies your receive from any non-probate transfer or you could have a creditor filing an action for recovery of the amounts you received.
If you are interested in learning more probate avoidance techniques, please don’t hesitate to contact us at (702) 798-4955.
For more than 30 years, Attorney Lee A. Drizin has practiced in the areas of estate planning, probate, trusts, guardianship, and real estate matters representing clients throughout the state of Nevada.
Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.