When planning an estate, understanding which assets are subject to probate can save your beneficiaries time and money. Probate is the court-supervised process used to distribute a deceased person's assets. It follows the directives of their will or, if no will exists, state intestacy laws.
This process can be intricate, lengthy, and costly, highlighting the importance of knowing which assets it will involve.
Assets Typically Subject to Probate
1. Solely Owned Assets
Any asset owned solely in the decedent's name without any designated beneficiary must go through probate. This includes personal possessions, cars, and real estate owned solely by the deceased.
2. Shared Assets Held in Common
Real estate or bank accounts held as "tenants in common" (where each party owns a specified share of the property, which does not automatically transfer to the other on death) will also go through probate to transfer the deceased’s share to their heirs.
3. Certain Types of Investment Accounts
While many investment accounts and insurance policies have designated beneficiaries, those without will face probate. Ensuring that all such accounts have a payable-on-death (POD) or transfer-on-death (TOD) designation can avoid this scenario.
4. Business Interests
If the deceased owned a business or part of one, the interest in the business usually goes through probate unless there are provisions within the business agreements that dictate otherwise.
Assets That Generally Avoid Probate
1. Jointly Owned Property
Property held in joint tenancy or as community property with the right of survivorship automatically passes to the surviving owner without going through probate.
2. Accounts with Designated Beneficiaries
Financial assets like retirement accounts, life insurance policies, and bank accounts that have named beneficiaries pass directly to those individuals and do not go through probate.
3. Trusts
Assets held in a living trust are not subject to probate. The trustee can distribute these assets directly to the beneficiaries according to the terms outlined in the trust, bypassing the court process.
Why Some Assets Avoid Probate
The primary reason some assets bypass probate is the presence of a beneficiary designation or co-ownership structure that automatically transfers ownership upon death. These designations provide a clear legal path for asset transfer outside the will, making the probate process unnecessary.
Implications of Probate
The implications of probate can be significant. It can freeze assets until the process is completed, which might take months or even years. This delay can prevent beneficiaries from accessing needed funds quickly.
Probate can also be expensive, with legal fees, court costs, and other expenses reducing the value of the estate passed on to heirs.
Strategies to Minimize Probate
- Consider Setting up a Trust: A well-structured trust can hold your assets and pass them directly to beneficiaries without probate. This tool is not only for the wealthy but can be a practical solution for many people to ensure smoother and faster transfer of their estates.
- Designate Beneficiaries Where Possible: Review all your financial accounts and insurance policies to ensure they have up-to-date payable-on-death or transfer-on-death beneficiaries.
- Own Property Jointly: Consider the benefits of holding property jointly if you want it to pass directly to a co-owner upon death.
- Give Gifts While You’re Alive: Gifting assets while you’re alive can reduce the size of your estate, which might be subject to probate.
Probate Litigation Attorneys in Colorado Springs
Taking steps to properly designate beneficiaries and possibly restructure how your assets are held can ensure a smoother transition of your estate to your heirs. Careful planning can save time, money, and stress later, making it easier for your loved ones to handle your estate after you're gone.
Reach out to Drexler Law today at (719) 259-0050 to learn more.
