Probate vs Non-Probate: What Is the Difference?
When planning your estate, it is important to understand the difference between probate and non-probate assets. Probate is the process through which a court determines how to distribute your property after you die. Some assets are distributed to heirs by the court (probate assets) and some assets bypass the court process and go directly to your beneficiaries (non-probate assets).
The probate process includes filing a will and appointing an executor or administrator, collecting assets, paying bills, filing taxes, distributing property to heirs, and filing a final account. This can be a costly and time-consuming process, which is why some people try to avoid probate by having only non-probate assets.
Probate assets are any assets that are owned solely by the decedent. This can include the following:
- Real property that is titled solely in the decedent’s name or held as joint tenants (deed does not specify joint with right of survivorship)
- Bank accounts that are solely in the decedent’s name;
- An interest in a partnership, corporation, or limited liability company;
- Any life insurance policy or brokerage account that lists the estate as the beneficiary or does not have a named beneficiary.
- A retirement plan that does not have named beneficiaries.
- Automobiles that are solely in the decedent’s name or held jointly but not joint with right of survivorship.
- There are special rules for automobiles held in the name of a deceased spouse. A surviving spouse may receive an automobile outside of probate of any value or more than one vehicle if the combined value is $65,000 or less.
Non-probate assets can include the following:
- Property that is held as joint tenants with right of survivorship;
- Bank or brokerage accounts held in joint tenancy or with payable on death (POD) or transfer on death (TOD) beneficiaries;
- Property held in a trust (please note having a trust alone is not enough to make sure that your property will not pass through probate-the property needs to be actually funded to your trust);
- Life insurance or brokerage accounts that list a beneficiary or beneficiaries; and
- Retirement accounts with a proper beneficiary or beneficiaries.
It is important to consider whether property is probate property or non-probate property when designing your estate plan. Your will does not control the distribution of all your property only probate property. Check the ownership of your property and your accounts to make sure jointly owned property will be distributed the way you want. It is also important to review your beneficiary designations to make sure that they are current.
If you have any question about how a particular piece of property will pass, please contact our office.
