Also known as: probate property · nonprobate property · non-probate property · probate assets · nonprobate assets
Written by attorneys — see sources below.
Assets owned by a decedent at death that are subject to administration under state laws governing decedents' estates. Nonprobate property consists of assets that pass directly to designated beneficiaries by operation of law or contract outside estate administration, such as joint tenancies with right of survivorship and payable-on-death designations.
Paul Peterson and his wife held their home as tenants by the entirety. While divorce proceedings were pending, Paul executed a will attempting to leave his interest in the home to his sister Phoebe Park. Paul died before any divorce decree was entered and before the tenancy was severed. Title to the home passed directly to his wife by operation of law rather than through probate under the will.
Pablo Perez created a revocable trust during his lifetime to hold interests in several business ventures. He executed a will directing additional LLC membership interests into the trust upon his death. After Pablo died the trust assets transferred directly to the named beneficiaries without entering probate administration.
Vickie Lynn Marshall, also known as Anna Nicole Smith, met J. Howard Marshall II in October 1991 and married him on June 27, 1994. J. Howard died on August 4, 1995. Although he had given Vickie substantial gifts and money during their relationship, his will made no provision for her. Vickie maintained that J. Howard had intended to secure her future through a catchall trust. Respondent E. Pierce Marshall, one of J. Howard’s sons, stood as the sole ultimate beneficiary under his father’s estate plan, which consisted of a living trust and a pourover will directing all remaining assets into the trust. In January 1996, while J. Howard’s estate remained subject to probate proceedings in Harris County, Texas, Vickie filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Central District of California. In June 1996 Pierce filed a proof of claim in that bankruptcy case asserting that Vickie had defamed him through statements made to the press shortly after J. Howard’s death. Vickie answered and asserted a counterclaim alleging that Pierce had tortiously interfered with her expected gift by imprisoning J. Howard against his wishes, surrounding him with hired guards, making misrepresentations to him, and transferring property contrary to his expressed intentions. The Bankruptcy Court granted summary judgment to Vickie on Pierce’s defamation claim. After a trial on the merits it entered judgment for Vickie on her tortious interference counterclaim and awarded her more than $449 million in compensatory damages, less any amount recovered in the Texas probate action, plus $25 million in punitive damages. Pierce then moved to dismiss for lack of subject-matter jurisdiction, arguing that the claim belonged exclusively in the Texas probate proceedings. In the Texas Probate Court, Pierce sought a declaration that the living trust and will were valid. Vickie initially challenged the instruments and asserted her own tortious interference claim there but voluntarily dismissed both claims after the Bankruptcy Court’s judgment. Following a jury trial the Probate Court declared the trust and will valid. On review of the Bankruptcy Court’s judgment the District Court rejected the probate-exception argument. The court adopted the Bankruptcy Court’s findings with supplements. It awarded Vickie approximately $44.3 million in compensatory damages together with an equal amount in punitive damages. The Ninth Circuit reversed. It held that the probate exception barred federal jurisdiction because the claim raised questions ordinarily decided by a probate court and because the Texas Probate Court had asserted exclusive jurisdiction over all of Vickie’s claims. The Supreme Court granted certiorari in 2005.
View casePortia Price named her spouse as the beneficiary on a life insurance policy and retirement account. After the couple divorced, Portia died without changing the designations. The proceeds passed directly to the former spouse outside probate because the beneficiary designations remained effective under governing law.
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 caseProbate property consists of assets owned by the decedent at death that require administration under state decedents' estates laws. Nonprobate property passes directly to beneficiaries by operation of law or contract, such as through joint tenancy with right of survivorship or payable-on-death designations, without entering estate administration.
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A will cannot dispose of nonprobate property held as tenants by the entirety or in joint tenancy with right of survivorship. If the decedent dies while the tenancy remains intact, title passes by operation of law to the surviving joint tenant rather than through the will.
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Some state statutes include specified nonprobate assets in the augmented estate for purposes of calculating the elective share. The elective-share fraction is then applied to the combined value of the probate estate and the designated nonprobate assets.
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Will substitutes such as revocable trusts, life insurance, pension accounts, and payable-on-death arrangements serve the function of a will but transfer property outside probate. They need not comply with will formalities because the transfer occurs by contract or operation of law at death.
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