Probate is a term we throw around a lot, especially after the death of a loved one. It refers to the court process of administering a deceased person’s estate. One of the most critical aspects of probate is determining which assets must go through the process. Understandably, this can be confusing and stressful for loved ones who are already grieving. However, understanding probate can make it less of a headache. If you’re confused about which assets need to go through probate, have no fear! You’re exactly where you need to be to have those questions answered. Here’s everything you need to know.
So, let’s start with the basics. If you happen to own an asset with another individual, like your spouse, they may assume complete ownership after you pass away without going through probate. Let’s start with an example. If both your names are on the deed to your house when one of you passes away, the house won’t have to go through probate. Instead, the surviving partner will become the sole owner automatically. However, assets that you solely own in your name may require probate. These individually owned assets include:
Some assets, such as bank accounts or real estate, don’t have a beneficiary or TOD. In such cases, these assets will have to pass through the probate process. Of course, in some instances, the beneficiary may actually predecease you. In those instances, you should consult with a financial advisor or estate planning attorney for further information.
Assets owned by an individual in their name alone or owned jointly as tenants in common may also need to go through probate. In instances like this, when a co-tenant passes away, the surviving will retain their half of the ownership, with a slight twist. The remaining half will go to the beneficiaries or parties named in the decedent’s will. Please note that probate is not always required for tenants-in-common property. However, if the co-tenant names beneficiaries in their will, one can typically avoid the probate process altogether.
Real estate is one of the many assets that may need to go through probate. This includes land and buildings affixed to the land, like houses or commercial buildings. In these instances, probate is necessary to transfer the title of the property to the beneficiaries named in the will. Keep in mind that probate can be a long, costly process. Taking steps to avoid potential issues associated with real estate can make your passing a lot easier for your loved ones.
If the deceased individual named their estate as the beneficiary of a life insurance policy, that policy must go through probate. However, if the policy names a specific beneficiary, it won’t go through probate. Please note that if your beneficiary dies before you, the policy’s payout will instead go into the primary insuree’s estate, where it’s subject to taxes. Adding a contingent (secondary) beneficiary to your life insurance policy may help avoid this. For further information, contact a life insurance broker or financial advisor.
Good news! Any assets held in a trust will NOT go through probate. The assets are already owned by the trust, so there’s no need to transfer them through the probate process. Interested in learning more trusts? Click HERE to find out further information.
More good news! Jointly owned assets or assets with a designated beneficiary don’t have to go through probate. These include jointly-held bank accounts or retirement accounts, like IRAs or 401(k)s. So, if you have a beneficiary, don’t worry. They won’t need to worry about probate court at all.
Bank accounts are not always subject to probate. However, if a bank account is in the name of a deceased person only, then it will typically need to go through probate. In contrast, accounts that have another name on them, such as a joint account or payable-on-death account (POD), can bypass probate altogether.
Investments accounts in the name of the decedent only will need to go through probate. This includes stocks and bonds. Typically, naming a beneficiary will help you avoid probate-related complications. You can also change a regular stock account into a TOD account, as well.
Originally published August 24, 2023