Typically, the probate process handles the distribution of assets owned by a decedent. An estate representative will identify the value of assets and address outstanding debts during this process. Also, the representative will pay taxes and distribute the assets to designated beneficiaries and heirs.
But some assets don’t go through probate. Non-probate assets have joint owners or beneficiaries who get ownership rights when the owner dies. They can significantly affect the administration of an estate. Thus, they should be properly accounted for as surviving family members settle concerns associated with the death of their loved one. Families should seek legal assistance and advice to know how they can use non-probate assets in estate planning.
Kind of Non-Probate Assets
The following kinds of assets do not go through the probate process:
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Jointly owned property. Property like real estate that is owned by several individuals with rights of survivorship doesn’t go through probate. This property automatically goes to the surviving owner if one owner dies.
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Payable-on-death accounts. Some financial assets let account holders designate beneficiaries to inherit the funds in an account upon death. The new owner gets the fund without having to account for the assets during probate.
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Insurance or retirement account proceeds. Retirement accounts and life insurance policies let owners name beneficiaries to get the proceeds without going through the probate process. This allows the beneficiaries to receive the funds quickly upon the death of the owner.
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Trusts. These estate planning instruments let assets be held and handled by a trustee. Assets held in a trust can be divided while avoiding probate.
How Non-Probate Assets Are Treated
Probate assets are controlled by the will of a decedent and must be supervised by a court. But non-probate asses are often granted to beneficiaries without probate. Thus, these assets are excluded from estate tax calculations or creditor claims against the decedent’s estate. However, some exceptions and limitations apply under certain circumstances and depending on local laws.
Proper Estate Administration
Estate executors should identify all related assets in an estate and make sure they are handled correctly. They may need to review several documents like property deeds, account statements, and trust documents. These documents depend on the kind of assets the estate contains.
After executors have identified non-probate assets, administrators of every asset category must coordinate. This makes sure all steps are taken legally while following the estate owner’s instructions. This allows them to distribute funds and transfer ownership rights without issues.
