When someone passes away, all of the real estate and personal property that they currently own individually becomes “estate property.” This means that, until the property is distributed to the deceased’s heirs and beneficiaries, their assets are simply considered to belong to the estate. Estate property includes personal property like cash, stocks, vehicles, clothing, furniture, and jewelry, and real property like houses, land, and buildings.
What Is the Difference Between Probate and Non-Probate Property?
Probate property is subject to probate, where a court supervises at least part of the estate administration, while non-probate property can pass to its new owner without the court’s involvement.
Most estate assets will be subject to probate. Most non-probate property will automatically transfer to named beneficiaries upon death. Assets may also be passed outside probate through the use of a trust.
In Texas, non-probate property includes:
- Jointly owned property with right of survivorship, such as real estate and bank accounts.
- Bank, investment, and retirement accounts with designated beneficiaries.
- Life insurance proceeds with designated beneficiaries.
- Any assets held in trust.
What are TOD, POD, JTWROS, or Beneficiary Designations?
Many bank accounts, retirement accounts, Certificates of Deposit, brokerage accounts, and other investments are “transfer on death” (TOD) or “payable on death” (POD) accounts. This means that the account owner can choose designated beneficiaries to receive the assets upon their death. However, the beneficiary has no interest in the account until the original owner passes away, and the account holder can change the beneficiary on an account at any time.
“JTWROS” stands for “joint tenant with the right of survivorship.” This is a type of ownership where two or more parties own an asset, such as a bank account or real estate, together. Each owner has access to the property during their lifetime, and if one of the owners dies, the survivors inherit the deceased owner’s share of the property. For bank accounts, the joint owners have a right to the amount they have contributed.
The term “beneficiary designation” refers to any situation where the owner of an asset selects a specific person or persons to inherit it upon their death. This can refer to TOD or POD or JTWROS accounts, as well as life insurance policies and other similar assets.
TOD and POD accounts, JTWROS property, and most other assets with a beneficiary designation are non-probate assets. This means they automatically pass to the beneficiary without going through the probate process.
Can You Use Funds from a Joint Account after the Other Account Holder Dies?
You can if the joint bank account is a JTWROS account, which means the surviving owner will retain ownership of the money in the account upon the death of a joint owner. However, you should check with your bank to see if your joint account includes survivorship rights.
How Do You Challenge Beneficiary Designations?
In some situations, you can contest a beneficiary designation in the probate court where the deceased person’s estate is being administered.
Some grounds for challenging a beneficiary designation include:
- Conflicts with community property laws
- Divorce (when the beneficiary is a former spouse)
- Problems with the execution of the designation form
- Attempted but failed designations
- Mental incapacity
- Undue influence, duress, forgery, or fraud
- Disqualification of a beneficiary
If you want to challenge a beneficiary designation that you believe to be invalid, you should immediately contact a knowledgeable probate litigation lawyer. An experienced attorney can help you determine if you have a legal reason to contest the designation and explain your different options to you.
Have questions? We’re happy to discuss.
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About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.