It is common to find clients who ask, “Which of my assets will go through the probate process?” This question typically arises from the fact that people hear that when they die, your estate would have to pass through a legal process known as probate. And the beneficiaries cannot inherit until probate is concluded. So you ask, are all my assets subject to this probate?
The answer is NO, not all assets fall under probate. However, it depends on how the assets are held (or owned). A house may pass through probate. A house may also not pass. It all depends on the deed (legal ownership). You may already have some assets that are generally non-probatable, such as your life insurance policy.
Notably, probate will only be conducted if you have assets that are subject to probate. These assets are called “probate assets.”
Probate assets
A probate asset is any property you own in your name alone, having no beneficiary designation in the document of ownership.
If your car, art work, or company bears only your name, then you have to write down in your will who these assets will go to. And the will must be taken to court for probate.
In the absence of a will, your wishes are not known and there is room for your family to squabble over your property. To avoid this, the court has to conduct probate all the same, invoking your State’s law of intestacy to determine who legally has a right to those assets.
Your share in a property is also liable to be listed under probate so long this share can be removed from the whole without ruining it. A good example is your interest from an investment owned between you and others. Such ownership is termed “tenants in common”.
Typically, only probate assets can go into your will. And most states have a threshold for probate. If your estate (the total value of your probate assets) does not surpass that threshold, then probate will not be conducted. The threshold is $30,000 in New York and $75,000 in Florida.
Assets which are not included in probate
- Assets that do not fall under probate are referred to as non-probate assets. These include:
- Assets held by joint tenancy with rights of survivorship
- Assets held in trust
- Retirement accounts and life insurance
- Accounts with payable-on-death bank account, and any other asset with beneficiary designation.
- Household goods.
These assets are not liable to be listed under probate because they either bear the name of a trust (rather than your name) or have beneficiary designation, or held jointly with some other person who has full claim to the property when you pass away.
How do non-probate assets pass outside probate?
Non-probate assets behave the way they do by reason of having a beneficiary designation outside the will. Also, some of these assets do not bare only your name as the sole owner.
- Assets held by joint tenancy with rights of survivorship – In such an asset, you are not the only owner. There are joint owners, tenants of the property, of which the surviving owner obtains full right to the property when the other owner dies. It is mostly used by spouses for their real property. It is beneficial because if an asset as expensive as real property goes through probate, the process can potentially get more expensive.
- Trust assets – All trust assets pass outside probate. By funding an asset into a trust, you are making the trust the owner of the asset i.e. retitling the asset. Since these assets are no longer in your name, they would not fall under a probate conducted for you. These assets will pass directly and immediately to the beneficiaries you named in the trust itself.
- In your life insurance, retirement accounts, and TOD bank accounts, you already designated a beneficiary when creating them. So these assets will pass down to the designated beneficiary immediately you pass away, whether you write a will or not.
Get help from an estate planning attorney near you
Since probate is costly and time-consuming, you may desire to free your loved ones of such problems by avoiding probate. You can do this through comprehensive estate planning. Executing a trust and holding property jointly is a great way to accomplish that. However, creating trusts and funding assets into them are more complex than writing a will. an experienced estate planning lawyer is in the right position to help you.
Get help from an estate planning lawyer near you today.
