I get asked a lot about the difference between a probate and a non-probate asset. The difference has nothing to do with the nature of the asset, but rather it has to do with the way the asset is owned and whether the asset has a beneficiary designation assigned to it. Whether an asset is a probate or non-probate asset is significant in terms of what happens when the owner of the asset dies.
For instance, an asset (let's say a bank account) that is owned by a person in his or her name alone with no beneficiary assigned to it is considered a probate asset and will be distributed according to that person's Last Will and Testament. However, if that person co-owned the account with another person (a child let's say) or if the person filled out a beneficiary designation form at the bank when the account was set up, that account may pass directly to the surviving co-owner or to the named beneficiary. In other words, it will pass outside the person's Last Will and Testament. The only assets to pass according to a person's Last Will and Testament are probate assets.
Know Your Assets
It is important to have a good understanding of how your assets are owned and whether there are named beneficiaries attached to the assets since that will impact the way your estate will be distributed when you die. You cannot just assume that your Last Will and Testament controls the distribution of all your assets. A good deal of litigation arises from this very issue and the claim that the ultimate distribution of a person's estate was not consistent with their testamentary intent. And while that may be true, legally the result may be much different than what the parties had expected.
Moral of the Story
Take the time to have a basic will prepared and while you are doing that, make an inventory of all your assets and know how each of those assets will be distributed when you die. This way your intent will be carried out with clarity and certainty. After all, you will not be around to clear things up!