Nearly every estate is made up of probate assets and non-probate assets. Probate assets include property not specifically designated to pass to a beneficiary upon the death of its owner. Non-probate assets, on the other hand, include assets such as joint titled bank accounts, insurance policies and retirement plans that immediately transfer to a beneficiary upon the owner’s death. Under the Arizona Probate Code, wills only control probate assets. When creating an estate plan, people must carefully consider probate and non-probate assets to make sure their estate is distributed according to their wishes.
One issue that personal representatives sometimes encounter is a will provision that gives a non-probate asset to an individual other than the asset’s named beneficiary. For example, a will might give the proceeds of a life insurance policy to one individual, while the policy itself names somebody else as the beneficiary. While individuals can generally prevent such a scenario by working with an Arizona probate attorney, this scenario is nevertheless all too common.
The obvious question is whether the will takes precedence over the beneficiary designation under Arizona probate law. Even if the will clearly indicates the decedent’s intent to give an asset to somebody other than a named beneficiary on a non-probate asset, the asset will pass according to the beneficiary designation. This is because the law of contracts – not Arizona probate law – controls the transfer of non-probate assets. And, under contract law, insurance companies are bound by the terms of their policy, including beneficiary designation, regardless of whether a will provides conflicting instructions.
The importance of preparing a will should not be diminished. When drafting a will, however, people should not overlook their non-probate assets. An Arizona probate attorney can help people examine all of their assets to ensure that everything is in order. By properly designating beneficiaries on non-probate assets, and including probate assets in a well-drafted will, people can see to it that their final wishes are carried out.