Non-Probate Transfers

When someone dies, people—attorneys included—tend to think of the inheritance that person is transferring only in terms of wills and trusts. The reason for this is because most assets are transferred through either intestate probate, a probate of a will, or through the machinations of a trust.

However, there is an entire category of assets that can be transferred wholly separate from the testamentary documents, and those are assets that have individual death designations. These can be financial accounts, but more often then not, they take the form of life insurance.

Why is this important to keep in mind? Well, you don’t always know what policies someone might have and their estate attorney may not have the knowledge to even inform you about their existence. As such, after someone passes you should keep an eye out for an insurance policy or a financial account that is not owned by a trust. As these might have transfers set up differently than the person articulates in their testamentary documents.

Now, these differences can be both purposeful and accidental. When someone updates their estate plan, they may forget about their life insurance policy and fail to update the beneficiary listing there. Or, maybe that person wants one person to be taken care of via their insurance policy, and another person to be taken care of by their assets.

However, many times when undue influence occurs, the person who is taken advantage of can change their insurance policy beneficiary designation and none of their non-undue influencing heirs even know about that policy. What can happen in a situation like that is the policy gets distributed because the other heirs don’t even know to contest that beneficiary designation. While it isn’t the end of the road to collect those funds if they have been distributed to a bad actor, it does make it much more difficult to collect the funds (as the person who received them are generally free to spend the funds as they see fit).