Probate Versus Non-Probate Assets

Navigating how to access a loved one’s assets after their passing can be challenging. A common estate planning goal is to avoid probate, and with careful planning, this can often be accomplished.

What Does Probate Mean?

“Probate assets” are those which are owned solely by an individual at the time of his/her death (i.e. not jointly owned with another individual, and not having a designated beneficiary). To claim these assets, probate proceedings are required.  The county Surrogate’s Court must approve the deceased individual’s Last Will and Testament, and grant of Letters Testamentary to the nominated Executor, instilling in them the authority to marshal assets of the estate and distribute those assets in accordance with the Decedent’s Will. When there is no Will, this process is called Administration, and the heirs are the Decedent’s next-of-kin, as defined by law.  Probate and Administration can be costly and time-consuming. Many people look to avoid them by creating livings trusts and/or designating beneficiaries on their assets.

Real Property

Real property can be titled in a few different ways. Often, married couples jointly own their home with both names on the deed as tenants by the entirety.  That means when the first spouse dies, the surviving spouse owns the home 100% without any court intervention. (There is a similar form of property ownership known as joint tenants with right of survivorship, that is commonly used by parties who desire the same result but are not married.)

When real property is in just one name, or all owners with survivorship rights have passed away, it will have to pass through probate.

Sometimes people intentionally choose to own property without survivorship rights. A property owned by multiple parties as tenants in common is not jointly owned. When one individual pass away, his/her legal interest in real estate will become an estate asset. For example, two siblings may own real estate as tenants in common.  When one of them passes away, the Decedent’s interest in real property does not pass to the surviving party on the deed but rather passes under the Decedent’s Will or by intestacy to the beneficiaries/heirs.

Bank Accounts

Bank accounts can be owned individually or jointly. They can also generally have a beneficiary designation them. If an account is either jointly owned or has a beneficiary listed (sometimes it is called a “transfer on death” designation), then that account is not considered a probate asset. If the account is owned individually without a named beneficiary, then the account becomes part of the deceased individual’s estate, and an estate filing is required.

Beneficiaries on IRA and/or 401K

Since IRA’s and 401k’s are employment-based investment options, they cannot be jointly owned. It is crucial that primary beneficiaries and contingent beneficiaries are listed on these types of accounts. If a beneficiary is listed, the account can be easily transferred to that person upon death with minimal work. If there is no beneficiary listed, the account will often become a probate/estate asset and will require the appointment of an Executor or Administrator to transfer the account into the name of the estate. This also makes it subject to creditors of the estate such as Medicaid.

This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.