Also known as: probate nonprobate distinction · probate vs nonprobate · probate property · nonprobate property · probate assets · nonprobate assets · probate avoidance · nonprobate transfer
Written by attorneys — see sources below.
The legal distinction between assets that pass through court-supervised administration upon a decedent's death and those that transfer directly to designated beneficiaries by operation of law or contract. Probate property consists of assets owned by the decedent at death that are subject to estate administration. Nonprobate property includes arrangements such as joint tenancies with right of survivorship, payable-on-death accounts, life insurance beneficiary designations, and revocable trusts that shift possession or enjoyment outside probate at death.
Patricia Patel and Pierre Poulin held their home as tenants by the entirety. While divorce proceedings remained pending, Patricia executed a will leaving her interest in the home to her nephew. Patricia died before any decree severed the tenancy. Title to the home passed directly to Pierre by operation of law rather than through the will or probate administration.
Penelope Price and Perry Pratt divorced. Perry had previously named Penelope as beneficiary on his ERISA-governed life insurance policy and pension plan. Perry died shortly after the divorce without changing the designations. The plans paid Penelope directly as the named beneficiary, bypassing probate and any state revocation statute.
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 casePriscilla Parks died leaving both probate assets and nonprobate transfers. Her estate's personal representative brought a claim in federal court asserting tortious interference with an expected inheritance from nonprobate assets. The court examined whether the claim fell within the probate exception to federal jurisdiction or could proceed independently of state probate proceedings.
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 caseA will has no effect on property held in joint tenancy with right of survivorship or as tenants by the entirety. Title passes directly to the surviving joint tenant by operation of law if the tenancy remains intact at death.
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The probate estate includes only assets owned by the decedent at death that are subject to administration under state decedents' estates laws. Assets that pass outside probate by beneficiary designation or survivorship are excluded.
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Some state statutes augment the probate estate with specified nonprobate transfers when computing the surviving spouse's elective share. The augmented estate then determines the fraction available to the spouse.
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Under the Uniform Probate Code, transferees of nonprobate transfers may be liable to the probate estate for allowed claims and statutory allowances to the extent the estate is insufficient, up to the value received.
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…decree of dissolution or declaration of invalidity.” Wash. Rev. Code § 11.07.010(2)(a) (1994). That statute applies to “all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity.” § 11.07.010(1). It defines…