QUESTIONS?
What Assets Go Through Probate
Our team is here to answer your questions and help you protect your legacy. If you’d like guidance tailored to your situation, schedule a time to talk with us.
Get StartedWhat Assets Go Through Probate?
When someone dies, their assets don't all get handled the same way. Some assets go through probate court, while others skip this process entirely. Understanding which is which can save your family time, money, and stress.
Think of probate as a sorting process. The court looks at what the deceased person owned and decides how to distribute it. But not everything needs this court supervision.
Assets That Go Through Probate
Probate assets are things owned solely by the deceased person with no automatic transfer mechanism. These assets need court supervision to change ownership:
- Real Estate in Sole Name: Houses, land, or commercial property owned only by the deceased. If your grandmother owned her house by herself, it goes through probate.
- Bank Accounts Without Beneficiaries: Checking and savings accounts that don't have a payable-on-death designation or joint owner.
- Investment Accounts: Brokerage accounts, stocks, and bonds without named beneficiaries or transfer-on-death instructions.
- Personal Property: Cars, jewelry, furniture, artwork, and collectibles owned solely by the deceased.
- Business Interests: Sole proprietorships or business ownership stakes without succession planning.
- Cash and Valuables: Money kept at home, safety deposit box contents, and precious metals owned individually.
Digital assets present unique challenges in today's world. Cryptocurrency wallets, online investment accounts, and digital businesses often require special handling during probate proceedings.
Assets That Skip Probate
Non-probate assets transfer automatically to new owners. These assets have built-in mechanisms that bypass court supervision:
- Joint Ownership Property: Real estate or bank accounts owned with rights of survivorship automatically go to the surviving owner.
- Retirement Accounts: 401(k)s, IRAs, and pension plans with named beneficiaries transfer directly to those beneficiaries.
- Life Insurance: Policies with named beneficiaries pay out directly, skipping probate entirely.
- Trust Assets: Property held in a living trust transfers according to trust instructions, not probate court.
- Payable-on-Death Accounts: Bank accounts with POD designations go straight to named beneficiaries.
- Transfer-on-Death Securities: Investment accounts with TOD beneficiaries avoid probate.
It's worth noting that these automatic transfers only work when beneficiaries are properly designated and still living. Outdated beneficiary information can cause unexpected probate complications.
The Key Differences
The main difference comes down to ownership structure and beneficiary designations. Probate assets lack these automatic transfer features.
Probate assets require court supervision because there's no clear legal mechanism for transfer. The court ensures debts get paid and assets go to the right people.
Non-probate assets have predetermined beneficiaries or joint owners. When the original owner dies, ownership automatically shifts without court involvement.
However, even non-probate assets can sometimes end up in probate proceedings if beneficiary designations are incomplete, outdated, or if all named beneficiaries predecease the asset owner.
Why This Matters
Probate takes time and costs money. The process can last months or even years. Court fees, attorney costs, and executor fees reduce the estate's value.
Non-probate assets transfer quickly. Beneficiaries often receive these assets within weeks of death. There are no court fees or lengthy legal processes.
Privacy is another factor. Probate is public record. Anyone can see what assets went through probate and who inherited them. Non-probate transfers remain private.
Additionally, probate can create cash flow problems for families who need immediate access to funds for funeral expenses, mortgage payments, or other urgent financial obligations during an already difficult time.
Common Misconceptions
Many people think having a will avoids probate. This isn't true. A will actually triggers probate because it tells the court how to distribute probate assets.
Another misconception is that only wealthy people deal with probate. Any asset owned solely by the deceased, regardless of value, typically goes through probate.
Some believe joint ownership always avoids probate. While usually true, this depends on how the ownership is structured. Joint tenancy with rights of survivorship avoids probate, but tenancy in common doesn't.
A particularly dangerous myth suggests that informal arrangements or verbal promises can substitute for proper legal documentation in transferring assets outside of probate.
Planning Strategies
You can minimize probate assets through proper planning. Adding beneficiary designations to accounts converts them from probate to non-probate assets.
Creating a living trust allows you to transfer ownership of assets to the trust. Since you're not the legal owner anymore, these assets avoid probate.
Joint ownership with rights of survivorship works for some assets, especially for married couples. But be careful - this strategy has limitations and potential drawbacks.
Regular review of your estate plan is crucial because life changes can affect asset classification. Marriage, divorce, births, deaths, and major purchases all impact which assets might go through probate.
Consider the tax implications of your estate planning strategies as well. While avoiding probate is generally beneficial, some approaches may have unintended tax consequences that outweigh the probate savings.
State Variations
Probate rules vary by state. Some states have simplified procedures for small estates. Others have streamlined processes for certain types of assets.
Community property states handle married couples' assets differently than common law states. These differences affect which assets go through probate.
Several states have adopted the Uniform Probate Code, which standardizes many procedures, but significant variations still exist in areas like small estate thresholds, simplified procedures, and timeframes for completing probate proceedings.
Special Considerations
Creditor claims can complicate the probate versus non-probate distinction. While non-probate assets generally transfer free from most debts, creditors may still have claims against certain types of non-probate assets under specific circumstances.
Taxes add another layer of complexity. Some non-probate assets may still be subject to estate taxes, even though they avoid the probate process entirely.
The Bottom Line
Understanding probate versus non-probate assets helps you plan better. You can structure your estate to minimize probate assets, saving your family time and money.
The key is proper beneficiary designations and ownership structures. With good planning, you can ensure most of your assets skip probate and go directly to your loved ones.
Consider working with an estate planning attorney to review your assets. They can help identify which assets would go through probate and suggest strategies to minimize the process.
Remember that effective estate planning requires ongoing attention and periodic updates to ensure your strategies remain effective as laws change and your life circumstances evolve.
