When is a Nonprobate Asset Not a Nonprobate Asset? Part 1
Under Washington probate and trust law, a nonprobate asset means “those rights and interests of a person having beneficial ownership of an asset that pass on the person’s death under a written instrument or arrangement other than the person’s will.” RCW 11.02.005(13). Examples of such assets provided by the statute include a right or interest passing under a joint tenancy with right of survivorship, a joint bank account with right of survivorship, a transfer on death deed, a payable on death bank account, a trust bank account, a transfer on death security or security account, a deed or conveyance if possession of the property has been postponed until the death of the person granting the deed or conveyance, a trust of which the person is the grantor and that becomes effective or irrevocable only upon the person’s death, a community property agreement, an IRA account or bond, or a note or other contract the payment or performance of which is affected by the death of the person.
For assets held “with right of survivorship,” the law provides the direction for transfer of the interest that was held by the now deceased owner of that interest. For a payable on death or transfer on death asset, the paperwork establishing or creating that asset provides the direction. The paperwork identifies one or more beneficiaries who are to receive the asset when the owner dies. It may identify concurrent beneficiaries or it may identify one or more contingent beneficiaries who would receive the asset if the primary beneficiary or beneficiaries did not survive the deceased owner of the asset.
The statute identified above also specifically excludes certain types of assets from the definition of “nonprobate.” The term does not include a payable on death provision of a life insurance policy, annuity, or other similar contract, or of an employee benefit plan. It does not include a right or interest that passes by descent and distribution (the law that applies when a person dies without a will). It does not include a right or interest if, before the person’s death, they have irrevocably transferred it or have waived the power to transfer it or, if a contractual arrangement is involved, they have waived the unilateral right to rescind or modify the arrangement. It does not include a right or interest held by the person solely in a fiduciary capacity (such as a trustee). Although some of these assets may seem similar in nature to assets described above that are included within the definition of “non-probate assets,” the Washington Legislature has determined that they should be excluded from that definition.
There are other circumstances in which a “nonprobate asset” may not be a “nonprobate asset,” but that will be the subject of a future blog.
If you need assistance with your estate planning, contact Per Oscarsson or one of the other attorneys in Beresford Booth’s Estate Planning and Probate Group Group at email@example.com or by phone at (425) 776-4100.