It is a common misconception that all of a deceased person’s assets go through the probate process to be transferred to their heirs. However, not all assets are subject to probate. Typically, assets that are solely titled in the deceased’s name are the ones that go through probate and are distributed according to the instructions in the will. In cases where there is no will, a personal representative appointed by the court handles the distribution of assets.
Assets that do not go through the probate process are known as non-probate assets. These assets are directly transferred to the designated heir or beneficiary upon the owner’s death. Having non-probate assets can alleviate the stress and time-consuming nature of the probate process for your loved ones.
Unlike assets subject to probate, non-probate assets do not incur any taxes or fees upon transfer. This ensures that the full value of the asset is passed on to your family without any deductions.
1. Exclusion of Jointly Owned Assets from Probate Process
Jointly owned assets, typically shared between spouses, bypass the probate process upon the death of one owner. Even if the deceased specifies in their will that the assets should go to their heirs, the surviving owner automatically assumes ownership. However, in cases where both owners pass away simultaneously or where the surviving owner neglects to add a new owner, the assets may undergo probate. An exception to this rule is tenants-in-common, where the deceased owner’s share may be distributed according to their will.
2. Non-Probate Status of Assets with Beneficiary Designations
Assets with designated beneficiaries, such as certain bank accounts, IRAs, and insurance policies, are exempt from probate. These assets are directly transferred to the named beneficiary upon the owner’s death, facilitating a swift and hassle-free transfer process. However, there are situations where assets with beneficiaries may still undergo probate, such as if the beneficiary predeceases the owner or if the owner designates “my estate” as the beneficiary.
3. Trust Assets Avoiding Probate
Assets held in a trust are shielded from the probate process, making it a popular choice for asset protection. Trusts can prevent the reduction of asset value due to taxes and fees, providing peace of mind for family members. In the case of a testamentary trust outlined in a will, the trust assets may be subject to probate.
In Summary
Choosing non-probate assets can spare your family from the complications of the probate process upon your passing. By understanding the various types of assets and their implications, you can safeguard your assets and ensure a smoother transfer to your loved ones.
