Estate Planning Basics: What’s the Difference Between . . . ?

Estate Planning Basics: What’s the Difference Between . . . ?

By | 2018-03-29T13:47:02+00:00 Thursday, April 12th, 2018|Bridget's Blog, Estate Plan|0 Comments

Estate planning involves a subset of property law, a notoriously arcane body of law that, in many ways, hasn’t changed for generations. As such, estate planners must be familiar with ancient concepts like escheatment (when a person’s property goes to the government because no heirs can be found), ademptions (what happens to a specific gift in a Will or trust if the property is no longer owned when the gift is supposed to become effective), and the rule against perpetuities (which governs, among other things, how long a trust can last).

Luckily, most people don’t need to be too familiar with those three concepts—that’s why people hire estate planning lawyers, after all. But there are also more basic estate planning concepts that everyone should be familiar with. This post briefly explores four of those basic concepts by asking, What’s the difference between—

  • Probate vs. Nonprobate; and
  • Testate vs. Intestate?

Probate vs. Nonprobate

Probate is the court-supervised procedure for paying off a deceased person’s debts and transferring property to his or her heirs or the people named in his or her Will. Property that is subject to probate is known as “probate property,” and the sum of all that property is the “probate estate.”

In California, probate is expensive and time-consuming. Fortunately, there are ways to dispose of property at death other than through the probate process, and many Californians design their estate plans specifically to avoid probate.

Any property that passes to another person upon death outside of probate is called “nonprobate property.” The sum of all nonprobate property is the “nonprobate estate.” Common types of nonprobate property include:

  • Life insurance. When the person whose life is insured dies, the insurance company pays the insurance proceeds to the beneficiaries that person chose while he or she was still alive. Normally, no court is involved in this process.
  • Retirement accounts. As with life insurance, the owner of a retirement account can name the beneficiaries who will receive the funds held in the account. When he or she dies, those funds are transferred directly to the named beneficiaries, without having to go through probate.
  • Property held in trust. Any property that a person transfers to a trust before he or she dies will avoid probate. The property will be managed and distributed by the trustee of the trust according to the instructions contained in the trust agreement.

Testate vs. Intestate

Now we’re focusing in on the probate estate. Probate property can be divided up and distributed either according to the rules of intestate succession or according to the terms of a Will.

“Intestacy” is the condition of dying without a Will. The rules for who gets what through intestate succession have been established by the California Legislature in the California Probate Code. I’ve also summarized the rules of intestate succession in the past.

In contrast, when a person leaves a Will, he or she is said to have died “testate,” and is commonly referred to as the “testator.” The Probate Code also includes rules for interpreting Wills, but the biggest rule is for courts to follow the testator’s instructions in distributing his or her probate estate.

In other words, dying intestate leaves a person with no control over what happens to his or her property, whereas dying testate permits a person to control who gets what, how, and when.

Conclusion

As you read through my blog, you’ll often find me referring to these concepts—that’s how basic they are to estate planning. I hope that this brief explanation of the differences between probate and nonprobate, and testate and intestate, help you gain a deeper understanding of the estate planning process. If you have questions or would like to begin the process of planning your own estate, you should contact an experienced estate planning lawyer near you.

About the Author:

Bridget Mackay is a Petaluma estate planning attorney who has been practicing law since 1996. She is a member of the Sonoma County Bar Association, California State Bar Association Trust and Estates Section and on the Board of the Sonoma County Women in Law. She also sits on the Board of the Cinnabar Arts Corporation in Petaluma. Connect with Bridget on Google

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