How Much Does an Estate Have to Be Worth?
When someone dies, their assets must be dispersed to whomever the deceased wished to receive them or whomever is eligible according to state law if no will was made. In many cases, this will involve a lengthy probate process. However, there are times when formal probate isn’t necessary. Instead, an informal process allows the estate to be handled quickly.
Before the heirs or executor of the estate decides to skip probate, they need to understand the circumstances that require the formal process and what assets may need to be included. This will help them take the correct steps in the distribution of the decedent’s estate. When probate is required, heirs and beneficiaries do not have to wait for probate before they can access their inheritance. Instead, they may be able to get an estate loan.
Common Assets That Go Through Probate
If the estate is set up correctly, it may not need to go through probate regardless of what assets are owned. In most cases, this would involve creating a trust that would own all the assets instead of the person. Additionally, assets with a direct beneficiary may not need to go through probate. For instance, a life insurance policy with a named beneficiary would go directly to that person without the need for probate.
Certain assets do commonly go through probate. If the deceased person was the sole owner of a piece of property, such as a vehicle or home, that asset would need to be included in probate. Their name would be the only one on the title.
Property owned with another person as tenants in common would be included in probate. An example would be if the deceased owned a rental property with a partner. Their share in the property would be probated to determine who would own it in the future.
Items that don’t come with a title may also need to go through probate if they have enough value. This includes furniture, appliances, household items, and personal items. Many times, the combined value of these items won’t be enough to mandate probate, but they would be added to the inventory of probated items if other assets exist that must be included.
Uncommon Assets Seen to Go Through Probate
There are always exceptions to the rules, and this is the case with probate. There are some uncommon assets that may need to be part of the probate estate. In these situations, you need to know what to do with the assets.
A prime example is what would normally be a direct transfer of property, but the beneficiary has died. For instance, a person lists a sibling as the beneficiary of their bank account as payable upon death. That sibling passes away and the account owner didn’t change the listed beneficiary before they died. Because the person listed as beneficiary is no longer living, the bank account will have to be included in probate.
Assets That Don’t Need to Go Through Probate
Many assets don’t need to go through probate because they can be directly transferred to a beneficiary. This means that someone has been listed on the proper documents as the beneficiary for that asset. Some examples include the following:
- Retirement accounts where a beneficiary is listed
- Life insurance
- Pension plans
- US savings bonds with a payable-on-death form
- US savings bonds that are co-owned
- Bank accounts with payable-on-death forms
- Securities that are POD
- Assets in a living trust
- Wages or commissions due to be paid to the deceased
Probate in real estate is another area of complexity. Real estate and other property may also be left out of probate if it meets certain conditions. In some states, real estate owned by the deceased person can go to the person named on the transfer-on-death deed. Property that is held in tenancy with the right of survivorship will automatically go to the second person named on the title. Some states allow for property that is owned as tenants by the entirety with a spouse. This means that the property will go to the spouse if both people owned it.
In some states, vehicles and boats can be transferred on death if the proper form was filled out. Other states allow for vehicles to go to immediate family members. Household goods may do the same under certain state laws.
One type of asset listed can almost completely remove the need for probate, which is the living trust. If the person placed all their assets in a trust, they transfer them to the beneficiary of the trust after the person’s death. Most people who set up a trust will place the majority of assets in the trust while others may only place certain types of property, such as real estate, in the trust.
How the Value Determines the Need for Probate
Another factor which determines the need for the estate to be probated is the value. Most states offer an option to formal probate for smaller estates. Every state has its own name for this more informal version of probate, but they follow the same principle.
If the total value of the estate is below a certain dollar amount, the executor can file for simplified probate or summary probate. No hearing is necessary for this type of probate, but it is limited to a specific dollar amount for the value of the estate. That amount will vary based on the state. Some states can be as low as $20,000 while others, like California, allow for estates up to $150,000 to qualify for simplified probate.
The first step to determine if an estate qualifies is to find out the limits in the state. Then, the executor must list all the assets and their dollar value to submit with the petition to file for summary probate. Creditors are still given time to file a claim against the estate, but it is usually much shorter.
Some states allow for an affidavit which would enable the beneficiaries to take ownership of the property. This only works if there are no disputes made against the estate. If the will is contested or other disputes arise, the estate would have to go through the normal probate process.
One important fact to consider is how the value is determined. You may need to get an appraisal for certain assets to know the worth at the time the owner died. However, any assets that don’t need to go through probate, such as those with a listed beneficiary, won’t be included in the value to determine if the estate needs to go through probate.
For example, a person had a home that is titled tenants in common with right of survivorship with their daughter. They also had bank accounts that were payable on death to the daughter. The person also owned a couple of nice cars that totaled $30,000. Only the cars would need to go through probate and their value would be all that is considered to determine if it qualifies for a small estate.
Filing a Will vs. Filing for Probate
There are several instances where you may not need to file a petition for probate with an estate. However, that doesn’t let you off the hook completely. You are still required to file the will with the court if one exists.
If you know a will exists and don’t file it with the court when a person dies, you could be liable for damages to any party that would have received something from the estate. This liability can be civil and criminal.
If you fail to file probate when it’s required, the assets cannot be legally transferred to the name of the heirs. This can pose quite a problem, especially if the asset is real estate or a business.
Probate can be quite confusing from knowing if and when you need to file to handling the tasks that come with a probated estate. If you aren’t sure of the next steps, you can contact a probate attorney who will help you go through the process. Working with legal counsel can alleviate the worries of whether you need to file based on your particular situation and the state where the estate is located.
Sources:
https://www.legalmatch.com/law-library/article/informal-probate-laws.html
https://estate.findlaw.com/probate/simplified-or-summary-probate-for-small-estates.html
https://www.alllaw.com/articles/nolo/wills-trusts/what-assets-go-through-probate.html
https://www.legalzoom.com/articles/what-assets-need-to-be-listed-for-probate
https://ez-probate.com/learn/blog/what-happens-if-no-probate-is-filed/