Probate Vs. Non-Probate Assets

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Probate Vs. Non-Probate Assets Written by: Aubráa D. Jernigan, Estate Administration Assistant

The Last Will and Testament is a familiar legal estate planning document that allows the creator to record what should happen to her assets at her passing. This document nominates an Executor(s) to carry out her wishes, names beneficiaries to inherit assets, and includes charitable giving and nominations for legal guardians of minors, if applicable. An individual that passes away with a valid Will in place has died testate. An individual that passes away without a valid Will in place has died intestate. In both scenarios, probate is likely required.

Probate is the legal process by which a decedent’s assets are administered. In cases where a valid Will exists, the stated wishes for inheritance are followed. In cases where a valid Will does not exist, the state’s intestacy rules must be followed. Locally, the threshold for when probate is required is very low.

The Probate process includes, but isn’t limited to, filing the Will, appointing an Executor, collecting assets, recording those assets on a formal inventory, paying bills, filing taxes, preparing accounting(s), and distributing assets to heirs.

Probate assets are defined as being solely owned by the decedent and do not name a beneficiary. For example, real estate, bank accounts, investments, stocks, bonds, vehicles, and personal property could be subject to probate. It is only after the public, expensive and time-consuming process of probate that those assets are distributed to the heirs.

Non-probate assets are traditionally defined as being jointly owned or as having a designated beneficiary. In these instances, assets would bypass the probate process, but there are other considerations.

Understanding the differences between probate and non-probate assets sometimes inspires families to pursue homemade estate planning – using beneficiary designations and joint ownership on every asset. Experienced professionals strongly caution against this practice as it opens the door to significant and very common risks, and typically eliminates much needed estate liquidity. Instead, avoiding probate can be achieved by replacing a traditional Will with a properly funded Revocable Living Trust.

The role of an experienced elder law and estate planning firm is to help families identify ways that a thorough estate plan can support them during their lifetimes, during the need for long-term care, and at death. These conversations should always include a discussion of probate and measure a client’s interest in avoiding it.