When planning your estate, it’s important to know what constitutes probate and non-probate assets. This will help ensure that your wishes are carried out as planned. For example, if you own an individually owned savings account that is worth $20,000, it will pass to your children according to your will.
Probate is the process of administering an estate
Probate is a process that carries out the wishes of a deceased individual as stated in his or her will. In addition to ensuring that the correct beneficiaries receive the estate, probate also helps ensure that any debts are paid. However, the process can be costly.
This includes fees for the appointing of executors, attorneys, and appraisers. Additionally, creditors need to be notified of the death and given an opportunity to submit their claims. Finally, there are costs for the administration of the estate, such as fees to publish notices and court filings. In many cases, these costs can be covered by non-probate assets. This includes real estate held in joint tenancy with rights of survivorship, bank accounts with payable on death or transfer on death (POD) beneficiaries, and life insurance policies.
Non-probate assets are excluded from the probate process
In estate planning, non-probate assets are a great way to simplify the administration of a decedent’s estate. These include physical property titled solely in the decedent’s name or held as a tenant in common, financial assets such as brokerage accounts and bank accounts, and life insurance policies that have no living beneficiary.
These assets are passed directly to the surviving joint owner, or to beneficiaries designated on the asset itself (for example, on a 401(k) document, a life insurance policy, or a car title). Non-probate assets also include assets that have been paid to a beneficiary through transfer-on-death designations.
It’s important to understand how your assets are classified as probate or non-probate so that you can make sure that all of your wishes are carried out. The easiest way to do this is to establish a trust.
Non-probate assets are taxable
Non-probate assets are those that pass outside of the probate process and do not depend on the terms of a will. These assets can include life insurance policies with survivorship rights, joint bank accounts, retirement accounts, and other assets that have a designated beneficiary. Bypassing probate can reduce the likelihood that a disgruntled family member or creditor will contest a person’s estate plan.
Probate assets are those that are solely owned or titled in the decedent’s name, including real property not jointly owned, motor vehicles, and bank accounts. In contrast, non-probate assets are those that have a beneficiary designation or have a transfer on death (TOD) or pay on death (POD) designation. These assets can bypass probate altogether, as the beneficiaries will receive them directly.
Non-probate assets are controlled by a will
Assets that avoid probate include property held in a revocable trust, property owned by two or more people jointly with rights of survivorship, and bank accounts with transfer-on-death (TOD) or payable-on-death (POD) designations. These assets are normally made available to beneficiaries within a short period of time after the death of the owner, bypassing the probate process.
However, it is important to note that nonprobate assets are distributed based on their beneficiary designations and are not affected by the terms of the testator’s will. This is why it is essential to keep beneficiary designations up-to-date on all assets. Contingent beneficiaries should also be designated on these assets, as they will receive the asset if the primary beneficiary dies before the testator.
Non-probate assets are controlled by a trust
The distinction between probate and non probate assets is a crucial concept to understand when planning an estate. This distinction refers to the legal mechanism by which your assets are distributed upon your death. Probate assets are those that must be included in a Will or pass according to state law. Non probate assets, on the other hand, will automatically be transferred to beneficiaries. This includes assets titled jointly with rights of survivorship and those with beneficiary designations such as those found on a 401(k) application, life insurance form, or car title.
Some examples of non probate assets include a joint bank account with rights of survivorship, a payable on death (POD) bank account, and annuities that have a POD or transfer on death (TOD) designation. In addition to these types of assets, there are other ways that your property can be categorized as non probate, so consult with an estate-planning attorney to find out more.