Making estate planning a priority from the beginning will help to reduce the stress your loved ones will experience when handling your affairs after your passing. If you don’t prepare ahead of time, your estate can be subject to a stretched probate procedure that could have been avoided.
Making a Will as well as Living Trust, where you choose beneficiaries for particular assets, is one approach to guarantee that your assets are transferred in the manner you choose. Learning the distinctions between assets subject to probate and those that aren’t subject to probate is another approach to getting ready. So if that is your goal today, then start reading this guide.
Comparing probate and non-probate assets
The legal process of settling a decedent’s debts, as well as distributing property and money to heirs, is known as probate. A petition is filed in probate court to start the process, which involves several processes such as inventorying the estate, contacting creditors, paying debts, filing taxes, as well as obtaining court authorization to transfer property to heirs.
One of your first duties as the personal representative of a probate estate, often known as the executor or administrator, is to establish the assets that the decedent had. Some of those assets are regarded as “probate property,” or assets that will be allocated to heirs by the terms of a will or, in the absence of a will, by state law.
Non-probate property refers to other assets. Regardless of what the will specifies, these assets pass straight to beneficiaries or co-owners without going through the probate process. You can maintain checks on what needs to go through probate and determine whether it is even necessary with the assistance of a non-probate/probate property list.
What are probate assets?
In the majority of states, the personal representative is required to compile a list of all probate assets together with their values and then submit it to the probate court. This might also be viewed as a list of assets for the will. Some assets, such as bank accounts, are simple to value.
Others, such as collectibles, jewelry, as well as antiques, might need to be appraised. Here are assets that are subject to probate;
• Property, automobiles, as well, as other titled assets that were entirely owned by the deceased person or shared with another person. Tenants in common do not have survivorship rights. The owners are free to leave their portion of the property to another person.
• Clothing, jewels, collections, household belongings, as well as personal possessions all go through probate. Personal items left behind by the decedent after death should be listed in the inventory.
If the estate is worth less than a particular amount of money, several states don’t require probate. A streamlined probate process is available in some areas for small estates or when the entire estate is given to the surviving spouse.
However, going through the process can be beneficial even if probate is not necessary. It can also be time-consuming to sort through assets and financial records, and it’s not always clear what must go through probate and what doesn’t.
If you have concerns or are unsure of what assets to list with the probate court, it is recommended to seek legal advice from an attorney for probate.
What are non-probate assets?
Assets that are not subject to the probate proceedings are not reported to the probate court. The following items are non-probate properties:
• Assets with a trust named as the owner or with a trust named as the beneficiary. Living trusts are frequently created explicitly to avoid probate. The trust’s appointed trustee has the authority to execute its directions, which may include distributing trust funds to beneficiaries.
• Property with a designated beneficiary. IRAs, 401(k)s, pensions, and life insurance policies are good examples.
• Bank accounts with beneficiaries. If they are specified as payable on death (POD), they do not require probate. If a transfer on death (TOD) designation is present, other property, such as real estate or automobiles, is not subject to the probate process.
• Property that is jointly owned and has survivorship rights. This means that upon the death of one owner, the remaining owner will immediately inherit the departed owner’s interest in the property.
This is frequently how married couples own their home. In the title documents, search for the phrases “joint tenancy with right of survivorship” as well as “tenancy by the entirety.” If you reside in a state that recognizes community property, your state’s laws can also grant you a right of survivorship.
The remaining assets of the decedent are likely included in the probate estate once the assets that pass without probate have been determined.
How much should your estate be worth to go through probate?
When it comes to estate planning, more isn’t always better because smaller estates can avoid going through the probate process entirely.
For instance, in California, if the entire value of your remaining assets is less than $150,000, your estate will not need to go through the probate process.
Only those assets that are still present are regarded as probate assets. This indicates that even if your overall estate is larger, you could be able to benefit from a quicker or skipped probate procedure entirely.
Consider someone who owns a $500,000 joint property, a $300,000 bank account with a payable-on-death beneficiary, a $100,000 life insurance policy, $50,000 in assets held by a living trust, as well as a $20,000 privately owned car.
At first glance, one could believe that this person’s estate is worth $970,000 and must go through the probate process. The estate of this person, however, would probably be able to avoid probate in most states because the car is the sole asset subject to probate.
You should keep in mind that the definition of “small” differs from state to state, so be careful to review the specific probate rules applicable to your municipality.
Does probate apply to household items?
Yes, to be brief. Since household things are regarded as probate assets and lack a clear individual title, they must go through the probate procedure.
The sentimental value of these assets, which include things like furniture, clothing, collections, works of art, jewelry, and so on., can be significant despite their relatively low monetary value.
The executor of the estate will often distribute these assets following the Will. However, if a person has a certain household object they consider to be essential, they can list it in their living trust and, as a result, avoid probate.
No one likes to think about their death and plan when it comes to distributing their assets among their heirs. But you must know that this is one of the best ways to distribute everything equally and avoid disputes as well as lengthy procedures.
I hope this article helped you understand assets that can be probated and that fall under the non-probate category. Plus, you also know how much your asset should be worth and when probate is required, so it will be helpful when making a Will or a Living Trust.