Assets can pass to your beneficiaries either through the Probate process, or by "contract." Nonprobate Property are assets that pass to your children or other beneficiaries by contract. That is, during your lifetime, you have entered into a contract with your bank, brokerage firm, or insurance company to deliver specific assets to a designated beneficiary, automatically upon your death. Oftentimes we do this without thinking about it.
Assets such as savings accounts, checking accounts, brokerage accounts, mutual funds, or individual stocks or bonds can be titled in a joint and survivorship format. On the death of one of the parties, the assets pass to the survivor without going through probate. Alternatively, these same assets can remain in the name of a single owner, but have a "payable on death" or "transfer on death" designation, which names a beneficiary. On death of one of the owner, the assets pass to the designated beneficiary without going through probate.
The title to real estate can also be placed in a survivorship format or be held in such a way that the real estate passes to a named beneficiary automatically upon death. Just because the deed has two or more names listed on it does not mean that it is a survivorship deed. There is a common misconception that, by the mere fact that the names of a husband and wife name appear on the deed as owners, the title automatically passes to the survivor on the other's death.
Although the above methods are an easy and inexpensive way to avoid probate, they must be utilized in light of one's overall estate plan. In addition, keep in mind some of the potential problems - i.e. loss of control or access by the joint owner's creditor's - associated with having your assets owned in this fashion.