Determining Decedent’s Probate Assets

1. Nonprobate Assets Under Common Law
2. Nonprobate Assets That Are Not “Nonprobate Assets” Under Washington Law
3. “Statutory Nonprobate Assets”: Probate Assets That Are Convertible to Nonprobate Assets Due to Specific Statutory Exceptions
4. What Remains = Probate Assets
5. Summary of Nonprobate Assets vs. Probate Assets

Probate Assets + Nonprobate Assets = Total Assets

Another way of saying this is: Probate Assets = Total Assets – Nonprobate Assets.

Therefore, if we know all of Decedent’s assets, we can learn what are Decedent’s probate assets if we can determine Decedent’s nonprobate assets.

Nonprobate Assets are those that pass “outside of probate.” They generally come in two types:

• “Umbrella Nonprobate Assets,” such as those subject to a Community Property Agreement or a Living Trust; and
• “Solitary Nonprobate Assets,” such as Joint Tenancy Assets and Death Beneficiary Assets.

I. Nonprobate Assets Under Common Law

Under common law, nonprobate assets are considered to be those assets comprising a Decedent’s nonprobate estate, specifically, the collection of assets held by a Decedent that pass independently of his/her Will, “outside of probate,” and for which no probate proceeding is required to clear their title.

Nonprobate assets traditionally include:

1. “Umbrella Nonprobate Assets”: A collection of assets, all of which are subject to or held by a legal mechanism (ie, the “umbrella”) that provides that its collection of assets passes at death outside of probate, making all of the assets in the collection “nonprobate assets.” Mechanistically, this means that to create an “umbrella nonprobate asset,” one must first have created the “umbrella” (eg, by signing a Community Property Agreement or a Living Trust). Examples:
   1. Community Property Agreements: Property subject to a community property agreement, which property passes at death according to the terms of the agreement, usually to Decedent’s surviving spouse.
   2. Living Trusts: Property Decedent has transferred to a revocable living trust for his/her benefit, which property continues at death to be held by the trust, now for the benefit of the successor beneficiaries.
2. “Solitary Nonprobate Assets”: Any asset that is titled in a legal form that allows that specific asset to pass outside of probate, making that one asset a “nonprobate asset.” Mechanistically, this means that to create a “solitary nonprobate asset,” one needs only to take title to it in, or to transfer it into, its pertinent legal form (eg, by taking title to property in joint tenancy form). Examples:

   “Joint Tenancy Nonprobate Assets”:

   3. Joint Tenancy Property (but not property held as a tenant-in-common): Which passes at death to the surviving joint tenants.
   4. Joint Bank Accounts with Right of Survivorship: Which pass to the surviving joint tenants.

   “Death Beneficiary Designation Nonprobate Assets”:

   5. POD Accounts: Payable-on-death (ie, “in trust for” or “Totten trust”) bank accounts, which pass at death to the designated payable-on-death beneficiaries (but not to Decedent’s estate).
   6. TOD Securities: Transferable-on-death securities and securities accounts, which pass at death to the designated transferable-on-death beneficiaries (but not to Decedent’s estate).
   7. IRAs: Property held in Decedent’s individual retirement accounts, which property passes at death to the designated beneficiaries (but not to Decedent’s estate).
   8. Life Insurance Contracts: The paid-on-death proceeds of life insurance contracts on Decedent’s life, which proceeds are paid at death to the designated beneficiaries (but not to Decedent’s estate).
   9. Employee Benefit Plans: The paid-on-death proceeds of Decedent’s employee benefit plan, which proceeds are paid at death to the designated beneficiaries (but not to Decedent’s estate).
3. Other, infrequent types, for example:
   10. “Foreign” Property: Real property or tangible personal property located outside the State of Washington (for which an “ancillary” probate may be necessary in that state).
   11. Wrongful Death Awards: Which are awarded to Decedent’s survivors (although the lawsuit itself can be prosecuted only by Decedent’s Personal Representative, necessitating a probate for his/her appointment) (see: RCW 4.20.020 and Appointing a Personal Representative to Bring a Wrongful Death Action
   12. Retained Life Estates/Remainders: Property whose title Decedent has transferred (ie, remainders) but whose possession Decedent has retained until his/her death (ie, retained life estates), which property passes at death to the remainder grantees according to the Deed or other conveyance document.

 

A quirk in Washington law provides that some Nonprobate Assets are “not Nonprobate Assets,” but fortunately this does not affect their ability to pass “outside of probate.” If fact, what it does is to make them “Super Nonprobate Assets,” by shielding them from Decedent’s Creditor’s Claims.

II. Nonprobate Assets That Are Not “Nonprobate Assets” Under Washington Law

Unfortunately and confusingly, the definition of “nonprobate assets” under Washington law removes from the definition of “nonprobate assets” some assets that have traditionally been considered to be “nonprobate assets,” for example:

8. Life Insurance Contracts: The paid-on-death proceeds of life insurance contracts on Decedent’s life; and
9. Employee Benefit Plans: The paid-on-death proceeds of Decedent’s employee benefit plan. RCW 11.02.005(15)

Life insurance and employee benefit plan proceeds paid at Decedent’s death therefore become, under Washington law, “nonprobate assets” (in the sense that a probate is not required for them to pass) that are not “nonprobate assets” (in the sense that Washington law defines them otherwise). The confusion, fortunately, is only semantic. The purpose of this provision of Washington law is not to provide for the necessity of probating these assets but, instead, to remove these assets from their being subject to:

• Abatement (selecting which of Decedent’s gifts should be sacrificed for the payment of Decedent’s debts and the estate’s taxes and costs of administration if insufficient funds remain for their payment — in other words, upon the estate’s being near insolvency); and
• Any of Decedent’s debts or the estate’s taxes and costs of administration upon the estate’s actual insolvency.

In other words, the beneficiaries of life insurance policies and employee benefit plans paid at Decedent’s death receive all the proceeds regardless of Decedent’s and the estate’s creditors. A third way of saying this is … Washington law in effect turns life insurance policies and employee benefit plans into “super nonprobate assets,” whose proceeds are exempt from any debt, tax, or administrative expense, even in the case of insolvency — unlike all other “normal” nonprobate assets. RCW 11.18.200 See: RCW 48.18.410(1) re life insurance proceeds and RCW 6.15.20 re employee benefit plan proceeds.

Washington and federal law expressly allows a very specific set of Probate Assets to be treated as Nonprobate Assets, allowing them to escape from the probate process.

III. “Statutory Nonprobate Assets”: Probate Assets That Are Convertible to Nonprobate Assets Due to Specific Statutory Exceptions

As if this wasn’t confusing enough already, some specific assets that have traditionally been considered to be “probate assets” may be converted into “nonprobate assets” by specific statutory exception under Washington or federal law. This website will call these assets “statutory nonprobate assets,” and they include the following:

1. Washington Law:
   13. Bank Accounts to $2,500: RCW 30.22.109 provides that a financial institution may pay the balance of funds up to $2,500 in a deceased depositor’s account to the depositor’s surviving spouse or next of kin upon receipt of proof of death and an Affidavit or Declaration under Penalty of Perjury that no personal representative has been appointed for his/her estate.
   14. Credit Union Accounts to $1,000: RCW 11.62.030 provides that a credit union may transfer the proceeds of a deceased member’s account up to $1,000 to the member’s surviving spouse upon the delivery of an Affidavit or Declaration under Penalty of Perjury that the member has died and no personal representative has been appointed for his/her estate.
   15. Unpaid Wages to $2,500: RCW 49.48.120 provides that an employer may pay a deceased worker’s unpaid wages up to $2,500 to the worker’s surviving spouse (or children or parents, in that order) upon the delivery of an Affidavit or Declaration under Penalty of Perjury that the worker has died and no personal representative has been appointed for his/her estate.
   16. Social Security Benefits up to $1,000: RCW 11.66.010 provides that upon a request within 30 days of Decedent’s death, Decedent’s final Social Security benefit of up to $1,000 may be paid to the surviving spouse (or children, or issue, or the State if Decedent was a resident of a state institution at death and owed the State at least as much as the amount of the benefit, or parents, in that order) upon the delivery of an Affidavit or Declaration under Penalty of Perjury that shows:
       1. The Decedent’s date of death,
       2. The relationship of the claimant to the Decedent,
       3. That no Personal Representative has been appointed or is anticipated to be appointed, and
       4. That the claimant has the highest priority among all possible claimants.
   17. Vehicles: The Washington Department of Licensing will transfer the registration of a car or boat registered in Decedent’s name to any person who properly submits a Form TD-420-041: Affidavit of Inheritance/Litigation, stating that Decedent left no estate necessitating administration, and that no Personal Representative has been appointed for his/her estate.
2. Federal Law:
   18. IRS Tax Refunds: The IRS will send any refund due Decedent to any person who properly submits a Form 1310: Statement of Person Claiming Refund Due a Deceased Taxpayer in which the person states that he/she will apply the refund according to the laws of Decedent’s resident state and no personal representative has been appointed for Decedent’s estate.
   19. US Savings Bonds: For the procedure for any specific bond, either
       1. Telephone the Seattle branch of the Federal Reserve Bank, at 206 343-3734, or
       2. Go to Treasury Securities & Programs. For example, for EE or E Bonds, see: Death of a Savings Bond Owner.

Whatever nonprobate assets result from this analysis should be able to pass at death without requiring a probate to clear title. If all of Decedent’s property consists of, or may legitimately be converted to, “nonprobate assets” as described above, then Decedent has no “probate assets,” and no probate should be required to clear title at death.

What’s left = Decedent’s Probate Assets:

• Decedent’s separate property held in Decedent’s name, and, if married,
• Decedent’s 1/2 interest in community property (to the extent not subject to a Community Property Agreement).

IV. What Remains = Probate Assets

What other kind of property is left?

• Decedent’s separate property held in Decedent’s name, and
• If Decedent was married at death, Decedent’s & Decedent’s surviving spouse’s community property that is:
  • Held in their names, and
  • Not subject to a Community Property Agreement.

If Decedent holds property in either of these ways, then they are “probate assets,” and a probate proceeding will likely be required in order to clear their title — that is:

• To take Decedent’s name off their title and re-title them in the names of Decedent’s Heirs or Beneficiaries, and
• To confirm Decedent’s surviving spouse’s one-half interest in their community property.

For more specific examples of “probate assets” and “nonprobate assets,” see: Examples of Probate Assets.

And, as a last gasp effort to avoid probate for real property, see: Administering Real Property by Affidavit.

V. Summary of Nonprobate Assets vs. Probate Assets