There is much confusion about the probate court process, including how much it costs, the time involved, and whether it can be avoided. A basic understanding of probate and non-probate assets can help shed light on these issues. For more information, also see Dispelling the Probate Court Myths and How to Avoid Probate Court.
Non-probate assets are those assets with a beneficiary designation or held as joint tenants with rights of survivorship. Non-probate assets also include assets held in the name of a Trust or with a Trust named as the beneficiary. Assets with beneficiary designations may include life insurance policies, 401(k)s, IRAs, annuities, and assets with a pay-on-death (POD) or transfer-on-death (TOD) designation. These assets will pass directly to the named beneficiaries. Any asset held as joint tenants with rights of survivorship (JTWROS) will pass directly to the surviving joint owner. Non-probate assets can be claimed by the beneficiaries without involvement of the probate court. A Will does not control these assets.
Probate assets are those assets held in the decedent’s individual name only, with no beneficiary designation and not held as joint tenants with rights of survivorship. These assets are required to pass through probate court and be distributed according to the decedent’s Will, and if there is no Will, according to state statute. Examples may include real estate, stock, or a bank account titled in the decedent’s name alone.
When you are deciding who will benefit from your estate and to what degree, it is important to consider both your probate and non-probate assets. Even if you have a trust, you may end up with probate assets if the trust is not funded or if beneficiary designations are not updated appropriately.