What happens to the properties, investments, and other precious items left behind when someone passes away? Ideally, their assets are distributed among their beneficiaries as stated in their will. In 2023, research found that about 46 percent of Americans over 55 prioritized estate planning. These individuals have created wills to leave specific instructions on distributing their properties and other assets upon their death. Without a will, families may argue about what to do with the assets, and the ensuing conflict can turn loving relationships into litigious ones.
Apart from creating a will, anyone who wants to keep providing for their loved ones even after death should know about the probate process, which is the legal process of distributing assets. In addition, classify these assets into probate and non-probate assets. Knowing the difference between these two will ensure they are distributed according to your wishes and prevent hassles during the estate closure.
What are Probate Assets?
According to legal experts at haysfirm.com, probate assets are assets that must go through a reviewing process to determine their inheritors. This process focuses on the authenticity and validity of a will. If you had the foresight to create a will before your passing, it still needs to be authenticated by the court. Moreover, a lawyer can initiate probate proceedings with or without the existence of a will.
One example of a probate asset is any type of real estate, such as a house, apartment, or land that the deceased person solely owns. So, this means that if you are single, if the property does not have a co-owner, or if you did not designate a beneficiary in your will, then it is up to the court to decide which of your loved ones will inherit it.
Other examples of probate assets are personal belongings with significant value, including artwork, vehicles, gold and other precious metals, and jewelry. Even items with sentimental value or special meaning to you, such as handbags, clothing, books, perfume, comic book or baseball card collections, action figures, vintage records, and the like, are all considered probate assets.
Other items solely in your name, such as savings accounts, checking accounts, certificates of deposit, mutual funds, and stocks and bonds, are also considered probate assets. A business that is under sole ownership also belongs to this category.
Defining Non-Probate Assets
Non-probate assets are assets that do not need to go through the probate process and are instantly available to the beneficiaries without going through court reviews. An example of this is jointly owned property. So, for instance, if a spouse survives another person, anything they jointly own, such as their home, business, bank accounts, and investment accounts, is automatically transferred to the spouse. Meanwhile, designated beneficiaries will receive retirement accounts and life insurance payouts.
The Importance of Having a Will
The probate process can take months or even years to complete, depending on whether the deceased left a will or not. If a will exists, then the executor, who is typically an immediate family member of the deceased, will initiate the probate process. The executor will file the will with the probate court, and once the court has reviewed the will’s validity, that is when they will grant the executor legal power to act and decide on behalf of the deceased. At this point, they can now distribute the assets as indicated in the will.
If a person dies without a will, the court will appoint an administrator with the same functions as an executor. The administrator’s tasks may take some time to complete since, apart from paying off debts against the estate, they will also need to locate all legal heirs of the deceased. Once the heirs have been identified and located, the probate court will divide and distribute the assets among them.
Without a will, you can expect the probate process to take longer and will likely be more costly. If you do not want to burden your loved ones with these matters, then plan wisely and consult your family lawyer or an estate planner so you can come up with a legal strategy to avoid probate.
Avoiding Probate with a Living Trust
The probate process takes time and can be complicated, so to avoid it; you will need to consult an estate planner to create a living trust. A trust provides specific instructions on the distribution of assets after the grantor’s death. It also designates a trustee to manage the assets while considering the grantor’s best interests.
Apart from the distribution of assets, a trustee can also make legal decisions for you should you become incapacitated. So, apart from making a will, assign a family member, friend, or advisor who is proven to be honest and responsible as your trustee.
Knowing the difference between probate and non-probate assets lets you know how to distribute your assets. To protect your family and avoid disputes, consult an experienced estate planner while creating a will or a living trust.
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