When it comes to estate planning and distributing assets, probate assets play a vital role. But what exactly are probated assets, and how do they apply when writing a will? In this article, we will simplify their complexities by explaining what they are, how they are handled, and their significance in estate management. Therefore, let’s delve into this topic and gain a clearer understanding of probate assets.
Defining Probate Assets
Probate assets refer to assets solely owned by an individual and subject to probate court proceedings. Moreover, these include real estate, bank accounts, vehicles, personal belongings among others. However, not all of them must pass through probate jurisdiction.
Which Assets Go Through Probate?
Probate applies to assets solely owned by the deceased person that don’t have joint ownership, payable-on-death designation, beneficiary designations, or are not included in a Living Trust. These assets typically include:
– Bank accounts and investments
– Stocks and bonds
– Vehicles (like cars, boats, or airplanes)
– Business interests
– Real estate
– Personal belongings and household items
Assets held as tenants-in-common, where multiple owners have shares in a single asset, also go through probate. For instance, if you own part of a property with someone else, your share may need probate if not specified otherwise.
Do Household Items Go Through Probate?
Yes, household items such as furniture, clothing, collections, artwork, and jewelry go through probate because they don’t have specific titles. However, although they may not have high monetary value, they hold sentimental worth and are distributed by the estate executor unless specified in a Living Trust.
Estate Size and Probate
In many states, estates valued under a certain amount may avoid probate even if the total estate value seems high. This exemption applies to assets that qualify as probate assets.
Assets That Avoid Probate
Certain assets can bypass probate, such as:
– Life insurance or 401(k) accounts with named beneficiaries
– Assets under a Living Trust
– Funds designated on transfer-on-death or payable-on-death forms
– Pension plan funds
– Earned wages, salary, or commissions (up to a set amount by state law)
– Vehicles or household goods transferred directly to immediate family
Overall, jointly owned assets, assets with beneficiary designations, and those under a trust typically avoid the probate process. Understanding these distinctions helps in effective estate planning and avoiding unnecessary legal processes.
The Probate Process
The following are some steps involved in the process that is meant to validate the will left behind by the deceased person:
– Identifying and inventorying the decedent’s property,
– Paying off any debts owed by or taxes due from the decedent,
– Distributing any remaining assets to the beneficiaries named in the will.
By this legal process, estates are divided according to what was desired by those who died. Additionally, if no will can be found, then intestacy laws of that particular state would determine how property under an estate is distributed. The length and complexity involved in going through this depend on the size of the property under an estate and disagreements that may occur within family members.
Understanding the Disadvantages of Probate Assets
Understanding the implications of probate assets plays a significant role in estate planning while transferring assets. Herein we shall highlight three pertinent issues regarding these types of properties.
Probate – Time and Cost
Probating an asset might delay its distribution process for a couple of months or often longer. Various fees associated with these proceedings could reduce the overall value of such properties.
Lack of Privacy
Probate is a public process, meaning all details about the deceased person’s properties, debts, and beneficiaries are made public. This lack of privacy can be a concern for individuals seeking to keep their affairs confidential.
Potential Challenges
Probate is subject to legal contestations by disgruntled heirs or creditors. These disputes could drag on in the courts, resulting in more litigation costs.
Strategies to Minimize or Avoid Probate Assets
Establishing Joint Ownership (Joint Tenancy)
One effective strategy to convert probate assets into non-probate assets is by establishing joint ownership. If you add another person’s name—say your wife or anyone else—to your property (for example, real estate or financial accounts), it goes directly to that person when you die because they hold your place. This method ensures seamless transfer of such assets without going through probate.
Creating Revocable Living Trusts
Creating revocable living trusts is a common way to ensure that properties do not go through probate once you pass away. These assets, owned by the trust, cannot subject any party involved other than those named in it. An experienced estate planning lawyer can manage it effectively while alive.
Designated Beneficiaries:
Designating beneficiary accounts are one way to avoid probate for certain accounts, such as:
– Insurance policies,
– Retirement funds,
– Payable-on-death (POD) bank accounts.
Beneficiaries receive these assets directly, bypassing probate. It’s important to review beneficiary designations periodically, particularly during major life changes such as marriage, divorce, or the birth of children.
Conclusion
Understanding and using the right approach to probate property can cut court costs and preserve family privacy. Additionally, this article will provide you with some basic concepts of estate planning by defining what probate assets are, further explaining the process of probate, as well as outlining the implications of this procedure and giving hints on how to minimize or eliminate it completely. Moreover, when one wishes to plan for their own future, it is essential to seek services from experts in the field related to these matters. This ensures clarity in making decisions about properties and protects the rights of close persons from the complexities involved.
