People make many assets in their entire lifetime and when they (as an owner of the assets) pass away, many disputes arise in selecting the rightful beneficiary of those assets. Here’s where the probate process comes in.
A probate process is a legal process wherein a living trust or will have to be accepted in the court of law to transfer the assets to the righteous heirs.
When the judiciary completes the probate process, it lists the legal distribution of the assets in a valid public document. Many families prefer to form a will to prevent their assets from the probate process. However, many fail to prepare estate documents and will before they become descendants. When such things happen, beneficiaries have to go through the probate process especially if assets are more than $150K. So, what types of assets are subject to probate? And are there some assets that list under non-probate assets? To figure out the answers, let’s jump into the next section of the article.
What types of assets are subject to probate?
Probate assets include everything that is named after a deceased person that only has the court-supervised probate process to pass these assets to living beneficiaries. Bank accounts, life insurances, payable accounts on death, designations, retirement accounts, and some type of real estate can directly be named to beneficiaries, without getting into the probate process through completing some legal formalities.
Then everything that forms probate estate, will be beneficiaries probate assets. In transferring estate, a court proceeding takes place, in which the probate assets are transferred to the heirs officially. Probate assets have four common types.
Individual assets contain all property that is titled under the name of the decedent except co-owners and beneficiary designations. It also includes investment accounts, bank accounts, vehicles, airplanes, boats, stocks, bonds, real estate, and business interest – and the individual’s personal property that holds low prices such as electronics, artwork, and memorabilia.
Beneficiary assets with no beneficiary designation
Assets with beneficiaries can become part of the deceased probate if the beneficiary passes away before its owner. These assets include medical and health saving accounts, life insurance policies, and property in life estates, annuities, and retirement accounts with IRAs.
When the beneficiaries or all policies and accounts predecease from the decedent, the assets generally become part of their probate estate. The same happens when a deceased person fails to name beneficiaries for their assets.
The tenants-in-common property comprises the assets that are titled under the deceased’s name as a tenant-in-common with another individual (s) such as a company or industries. In these cases, each partner possesses a percentage of interest against the property that may be 50/50, 80/20, or 70/30 percent.
Real estate property or businesses are titled like this way. But other assets can also be titled having one or more individuals, this often happens when the decedent is married. The assets include bank accounts, bonds, stocks, investment accounts, etc.
The joint tenant’s property should not be muddled with probate assets for the righteous ownership. If the decedent changes the title of the tenant-in-common into another living beneficiary before one dies, the property will directly transfer to the name without going through the probate process.
Assets that are left out of trust
It often happens that people create a living trust in their lives and transfer their property into it. But generally, this does not mean that after their death, this property will not be probated.
However, properties held by the living trust do avoid probating, but years after if any asset of a decedent may arise, which they neglected to pass to the trust can be probated. A common solution that is recommended to avoid this dilemma is to create a pour-over document that will direct the court to include any property or asset that may title after the owner’s death will be given to the living trust.
Assets that are not included in probate
Finally, many assets do not go through the probate process if the deceased person created the will or if the decedent was married and owned many assets jointly or did anything to protect the assets from probate. A probate court hearing would not be necessary in these case:
- Retirement accounts – if the beneficiary is named
- US saving bonds (co-owned)
- Pension plan distribution
- Real estate – if the transfer of deed has created
- Funds payable on death
- Salary, wages, or commissions
- The state allowed ownership of property joint with tenants
- Registered boats or cars as transferred on death
- Household items and other goods that are subjected to transfer to family members under state laws
- Property and assets held by living trust
Moreover, many states provide simplified proceedings for the probate process in circumstances where the estates are of smaller values. The process is called ‘summary probate’. The executors can use the summary probate process if the assets of the decedent fall under a specific amount. The limit of this amount can differ across states. Where some start from just a few dollars while for others the limit is about $200,000.
process called the probate process. What types of assets are subjected to probate?
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