If a family member recently passed away or you’re planning for your future heirs, you may be wondering which assets will need to go through probate. Probate is the legal process of distributing assets to the heirs after all debts have been paid. This process is overseen by the court to ensure everything is done according to the will and to state law. You need to understand which assets are subject to probate and which ones can bypass this process.
How Probate Begins
Someone involved in the estate must file a petition with the court in the county where the decedent lived to open probate. The court appoints an executor or personal representative who manages the estate. One of the tasks of the executor is to take inventory of all assets and appraise them if needed. To accomplish this task, they must determine which assets are to be included in probate and which ones may be left out of the inventory.
What are Nonprobate Assets?
Nonprobate assets are those that don’t need to go through probate to be distributed to the heirs. These assets generally include anything with a named beneficiary or those with joint owners. The decedent may have multiple assets of the same type with some going through probate and others not. For instance, a bank account with a person named as payable on death would automatically go to that person while another bank account with no one named would need to be included in probate.
Distributions from a pension plan aren’t included in probate. Normally, the owner of the plan has already stipulated what happens to the pension upon the person’s death. In some cases, it stops immediately while in others, it may go to a surviving spouse.
Some states allow for certain assets to be kept out of probate while other states require them to be listed. A prime example is with vehicles. In some states, you may list someone as transfer on death, which automatically allows that person to claim ownership of the vehicle when the owner dies. Other states don’t allow this kind of transfer. Real estate is another example with some states using a quit claim deed to transfer ownership and others not allowing the process.
What are Probate Assets?
Probate assets are simply assets that must go through probate. A more definitive answer to this question is any asset that is not already designated to go to a beneficiary.
Assets to go through probate include personal items of the decedent, such as their jewelry and clothing. Some of these assets will require an appraisal to determine their value. Even if the will lists specific items for certain heirs, the estate must go through probate to allow transfer of ownership. Each state has a definition of estates that can avoid probate, mainly because of their size. In these cases, generally none of the assets need to go through formal probate.
Defined by Ownership
One of the easiest ways to tell if an asset should go through probate is by ownership. This may not be quite as simple as it sounds, which is why you need to know the differences.
Individual assets generally must go through probate, but you must know what fits into this category. Any assets that are owned solely by the deceased person with no other owner are considered individual assets as long as there are no named beneficiaries or payable on death tied to the asset. This usually includes personal items, collections, bank accounts, investment accounts, vehicles, and electronics.
Joint Owners with Rights of Survivorship or Tenants-in-Common
Assets listed as tenants-in-common are those with more than one person named in the title. The ownership doesn’t have to be 50-50. It could be 60-40, 30-70, or any other combination as long as both parties are owners. This type of ownership requires probate to determine how the decedent’s portion is to be handled. They may designate that their portion of the asset go to a child or other person rather than transferring to the other owner. This is most often seen in business partnerships. The exception is if the decedent puts this asset into a living trust before their death.
Property with joint owners or owners with rights of survivorship automatically go to the surviving owner with no need for probate. The most common example is with real estate owned by a married couple. The surviving spouse who is a joint owner would become the sole owner. Of course, there are exceptions, which is why it can be helpful to speak with a probate attorney about ownership of assets in this kind of situation.
Assets with Named Beneficiaries
Assets with named beneficiaries do not need to go through probate because they already have someone listed to take ownership after the decedent’s death. Examples include bank accounts with someone listed as payable on death. Investment accounts and securities may also have this type of designation, along with life insurance policies and retirement accounts.
One exception to this rule is if the beneficiary has already passed away. Many times, a person names a beneficiary of an asset. Years later, that person has passed away, and the decedent failed to name someone else in their place. In this situation, the asset that would normally not be probated must go through probate.
Assets in a Trust and Those Left Outside of the Trust
The next type of asset to consider is those in a trust. If a person set up a revocable living trust and put their estate into it, those assets aren’t subject to probate. Instead, they will go to the person named as beneficiary. Many times, the beneficiary leaves the assets in the trust and acts as the trustee since the trust is a separate entity of its own.
The exception to this rule is if other assets aren’t included in the estate. A person may purchase new assets after setting up a trust and fail to add them. In this case, those separate assets would be subject to probate. Sometimes, a person may create a will for any assets outside the trust. This will provide direction for what happens to those items, but they will still need to go through probate most of the time.
This list of probate and nonprobate assets provides you with some guidance on how to classify the decedent’s property. However, you may want to consult with a probate attorney who knows the laws of your state and can provide with more direct guidance.
What Assets Need to Be Listed for Probate? | legalzoom.com
Which of Your Assets Are Subject to Probate? (thebalance.com)
Probate Assets – Do Household Items go through Probate | Trust & Will (trustandwill.com)