Which Assets Must Go Through Probate?
Probate is the legal process that comes into play after a person passes away. It involves the verification and administration of the deceased individual's assets. The probate court supervises this procedure to ensure the correct payment of debts and taxes, as well as the distribution of the decedent's assets in accordance with their will. In the absence of a will, the distribution follows probate law.
But does every asset have to go through probate? Not necessarily. Some assets can bypass probate, which can provide relief during a difficult time and alleviate some of the legal burdens for the deceased's loved ones. So which assets need to go through probate? And which ones don't?
If you're currently going through the process and inquiring about a specific case, your answer will depend on the type of asset and how it's treated in the estate plan. It's in your best interest to consult an estate lawyer in your area for tailored advice and guidance.
Solely Owned Assets
The first category of assets that commonly need to go through probate are those solely owned by the deceased person. When you think about your own property, a significant portion likely falls into this category. It includes:
Real estate, such as houses or land, that's owned solely by the deceased.
Vehicles that are registered in the deceased's name alone.
Bank accounts in the deceased's name.
Investment accounts in the deceased's name.
Jewelry and valuable personal items solely owned by the deceased.
These assets must be inventoried, appraised, and eventually transferred to the beneficiaries or heirs. This process is carried out under the watchful eye of the probate court so that everything is done according to the deceased's will or state law. It can be a lengthy process, but being thorough is necessary to ensure that everybody gets what they're entitled to.
Assets Without a Designated Beneficiary or Joint Owner
Another type of asset that frequently goes through probate is any asset that doesn't have a designated beneficiary or joint owner. These may include:
Retirement accounts without a designated beneficiary.
Life insurance policies without a designated beneficiary.
Stocks and bonds without a transfer-on-death designation.
Savings or checking accounts without a payable-on-death designation.
Depending on how the above are handled in an estate plan, they may need to go through probate. This is because the designated beneficiary or joint owner designation supersedes any instructions in a will and automatically transfers ownership to the designated person. For example, if you have a life insurance policy with your spouse as the designated beneficiary, the proceeds will go directly to them after your death and not be subject to probate.
How Assets Held in Trusts Avoid Probate
When you establish a trust, you're essentially transferring your assets from your personal ownership to the trust. The trust becomes a separate legal entity that owns these assets.
Here's how it works: An attorney will help you create a trust document. Then you transfer your assets into the trust. You can appoint yourself as the trustee, which allows you to maintain control over these assets during your lifetime. You also designate a successor trustee who will take over the management of the trust upon your death.
The key point here is that since the trust technically owns these assets, they don't form part of your estate when you pass away. This means they don't need to go through probate. Upon your death, the successor trustee can distribute the trust's assets to the designated beneficiaries according to the instructions laid out in the trust document.
This distribution process happens outside of court, making it private and typically much faster and less costly than probate. Additionally, because the assets are not part of your probate estate, they are not subject to public notice requirements or potential claims from creditors.
Trusts offer a powerful tool for estate planning, allowing for a smoother transition of assets upon death. They can provide peace of mind knowing that your loved ones will be taken care of according to your wishes, without the delay or expense of probate. So if you're undergoing the estate planning process, it's worth considering setting up a trust to protect your assets and help your heirs and beneficiaries avoid probate.
Consult an Attorney
With proper planning, you can minimize the assets that need to go through this process and make things a bit easier for your loved ones after you're gone.
As always, I'm here to help guide you through your estate legal matters. Understanding probate is the first step toward effective estate planning. So, don't hesitate to reach out if you need help. My firm, Russell Manning Attorney at Law, is based in Corpus Christi. I serve clients throughout Bee County, Kleberg County, Nueces County, Live Oak County, Jim Wells County, Aransas County, and Victoria County in Texas.