Probate is the legal process of administering a deceased person’s estate, which involves identifying and distributing their assets to the beneficiaries named in their will or, if there is no will, according to state law. While the probate process can be lengthy and costly, certain types of assets may be exempt from probate. These assets can be transferred to beneficiaries without going through the probate process.
One type of asset that often escapes probate is jointly-owned property. This includes real estate, bank accounts, and other assets that are owned by two or more people and have a right of survivorship. When one owner dies, the surviving owner(s) automatically become the full owner(s) of the asset. For example, if a husband and wife own a house as joint tenants with rights of survivorship, the surviving spouse will automatically become the sole owner of the house upon the other spouse’s death, without the need for probate.
Another type of asset that may escape probate is property held in a trust. Trusts are legal arrangements in which a person (the grantor) transfers ownership of their assets to a trust, and appoints a trustee to manage and distribute those assets to the beneficiaries named in the trust. If the grantor’s assets are properly transferred to the trust before their death, those assets will not be subject to probate.
Life insurance policies and retirement accounts, such as 401(k)s and IRAs, may also be exempt from probate. These types of assets typically have a designated beneficiary, who will receive the proceeds of the policy or account upon the owner’s death. The beneficiary designation takes precedence over any instructions in the deceased person’s will, so these assets will not be included in the probate process.
Some states have laws that allow small estates to bypass probate. These laws, known as “small estate statutes,” provide an expedited process for transferring certain assets to the decedent’s beneficiaries if the estate is below a certain value threshold. For example, in Arizona, if the decedent’s estate is valued at less than $100,000 in real property and $75,000 in personal property, it may qualify for the small estate process.
In addition to the above assets, there are other ways to avoid probate. One option is to use a “pay on death” (POD) or “transfer on death” (TOD) designation for bank accounts and securities. This allows the owner to name a beneficiary who will automatically receive the asset upon the owner’s death, without the need for probate. Another option is to use a transfer-on-death deed for real estate, which allows the owner to name a beneficiary who will receive the property upon the owner’s death.
It’s worth noting that while these types of assets may escape probate, they may still be subject to other taxes and fees, such as estate taxes or capital gains taxes. It’s important to consult with a financial planner or attorney to determine the best way to handle your assets and ensure that they are distributed according to the decedent’s wishes. Related Info.
In summary, several types of assets may escape probate, including jointly-owned property, property held in a trust, life insurance policies and retirement accounts, and small estates in certain states. Using POD/TOD designations and transfer-on-death deeds can also help avoid probate for certain assets. It’s important to understand the rules and regulations surrounding probate and to plan accordingly to ensure that your assets are distributed according to your wishes after your death.