What Types of Assets are Subject to Probate?

Probate is a legal procedure for resolving an estate according to the deceased person’s will. The taxable estate of the deceased person consists of all the assets in which he or she holds an interest when he or she dies. However, only assets possessed separately in his or her name will usually have to undergo probate. The probate process differs by state—most states present a faster, less costly alternative if assets subject to probate are under a specific value, for instance, $25,000 or $50,000. Probate is public record as well. Thus, it reduces the privacy level of the estate.

Probate assets are anything possessed by a deceased individual that has no means of passing to a living beneficiary without a court-managed probate process. Life insurance earnings, bank accounts with payable-on-death designations, a few retirement accounts, and a few types of real estate ownership transfer straight to selected beneficiaries through operation of state law. Thus, probate is unnecessary.

Everything else establishes the deceased person’s probate estate. They are his or her assets. The estate will be subject to a court proceeding to remove these assets from the decedent’s name and sign them over into the names of his or her legal heirs and beneficiaries. There are four usual kinds of probate assets.

1. Individual Assets

Individual assets consist all property designated in the deceased person’s sole name without co-owners or payable-on-death and beneficiary designations. They usually include bank accounts, investment accounts, stocks, bonds, vehicles, boats, airplanes, business interests, and real estate. They can consist of personal property that might or might not have much value like artwork, collectables, and electronics as well.

2. Tenants-In-Common Property

Tenants-in-common assets consist of property designated in the deceased person’s name as a tenant-in-common with at least one other person. Every owner has a percentage interest in the property like eighty percent and twenty percent, or 50 percent and fifty percent. Real estate is frequently designated this way between single owners, but other kinds of assets can also be designated this way, as well as bank accounts, investment accounts, stocks, bonds, and vehicles.

This kind of property ought not to be taken for assets possessed by joint tenants or other plans with survivorship rights. Property held with survivorship rights passes right to the survivor when one owner dies. It does not need probate and is not incorporated in the deceased person’s estate. If the deceased person re-designates his or her tenant-in-common interest into the name of a living trust prior to his or her death, this transforms the tenant-in-common interest into a non-probate asset. It will not need a probate court proceeding to hand over to a new owner.

3. Beneficiary Assets with Predeceased Beneficiaries or No Beneficiary Designations

Even assets with beneficiary or payable-on-death designations can turn into part of the decedent’s probate estate if the beneficiary passes away before the owner. These assets may consist of health or medical savings accounts, life estates in property, life insurance policies, retirement accounts as well as IRAs and 401(k)s, and annuities. When every named beneficiary of an account or policy dies before the deceased person, the asset usually redirects to his or her estate and turns into part of his or her probate estate. The same is relevant when a deceased person fails to designate any beneficiaries at all, or if he or she designates his or her estate as the beneficiary.

4. Assets Excluded from a Trust

It sporadically occurs that somebody will generate a living trust and transfer his or her property into it. However, this does not essentially mean that none of his or her property will be probate assets at his or demise. Living trusts do avoid probate of the property held by them. However, years might pass during which the deceased person obtains extra assets, and he or she might overlook to pass all of them to his or her trust. A conventional solution to this problem is to produce a pour-over will to guide property outside of the trust into it at death. However, these assets are still subject to probate and pay a regular contribution to the deceased person’s probate estate.

Assets That Do Not Have to Undergo the Probate Process

A few assets like investment accounts with transfer-on-death (TOD) designations and retirement accounts makes allowances for the designating of beneficiaries and thus might move to beneficiaries without undergoing the probate process. Assets with joint ownership with survivorship rights transfer to the second owner when the initial owner passes away. If a TOD exists on the account, the assets will only go to the beneficiary if both joint owners die. In either instance, the asset will unlikely undergo probate. When somebody dies without a will or intestate, assets transfer to heirs at law through the probate process under state intestacy laws. There might not be much a person can do to evade undergoing probate when a loved one has died. However, it helps to know the procedure as the individual works with a lawyer or tax advisor.

Therefore, for the assets not normally subject to probate, if a person is a named beneficiary, he or she will likely be able to take ownership sooner and might save money on court expenses and lawyer fees. It is imperative to observe that, usually, even if a named beneficiary disagree3s with information declared in the will, the named beneficiary will still get the assets over the person designated in the will. Other laws that differ by state might be relevant and determine how the assets are handed over. If any uncertainty associated with the beneficiary exists, the problem is settled by means of the probate process. An individual, as always, ought to talk about his or her specific circumstances with his or her lawyer or tax advisor.

Conclusion

When a person plans his or her estate, he or she must consider if property is probate property. The individual’s will does not regulate the allocation of non-probate property. The person must review the ownership of his or her property and his or her accounts to ensure jointly owned property will be issued the way he or she wishes. It is also imperative for the individual to reassess his or her beneficiary designations. The person must get in touch with his or her lawyer to decide whether his or her property is being issued the way that he or she wants it to.