The number of persons calling our office to inquire about the definition of “probate” is staggering, and represents a gap in our collective knowledge as to how estate administration in Pennsylvania works. Understanding the definition of “Probate Estate” is essential to good planning for your future.
First, a person's assets are either “probate” assets or “non-probate” assets. Probate Assets are assets that would become part of your Estate if you were to die. Such assets generally will include any solely owned assets, except for many types of property that name beneficiaries, such as life insurance, IRAs/401ks, annuities, and Transfer-On-Death (TOD) accounts. Non-Probate Assets generally include jointly owned property, and other accounts that name a beneficiary, like the ones listed above. The distinction is critical, because Probate Assets will be governed by your Will, while Non-Probate Assets will not be governed by your Will—they pass to the beneficiaries who are named, or to the other joint property owners. Even though an asset is Non-Probate, it may still be subject to Pennsylvania Inheritance Tax.
The description above is quite general, and all clients should consult an estate planning attorney to ensure that you understand whether your Will will govern the ultimate disposition of those assets or not, and whether those assets are taxable are not. The distinctions are complex, and very important to understand.