Probate and non-probate assets are terms that refer to how property and assets are handled after a person’s death. Understanding the difference between these two types of assets can be important for individuals who are planning their estates or for those who are responsible for administering the estates of loved ones who have passed away.
Probate assets are those that are subject to the probate process. Probate is a legal process that takes place after a person’s death, during which a court determines the validity of a will and oversees the distribution of the deceased person’s property and assets. To be considered a probate asset, the property or asset must be owned solely by the deceased person and must not have any provisions for transferring ownership upon death. Examples of probate assets include real estate, personal property, and bank accounts that are not jointly owned or have a designated beneficiary.
Nonprobate assets, on the other hand, are not subject to the probate process and are typically transferred directly to the designated beneficiary or surviving owner without the need for court intervention. Examples of nonprobate assets include property that is owned jointly with the rights of survivorship, life insurance policies, retirement accounts, and bank accounts with a payable-on-death (POD) or transfer-on-death (TOD) designation.
One of the main advantages of nonprobate assets is that they can bypass the probate process, which can be time-consuming and expensive. Probate can take several months to complete and may involve court fees, attorney fees, and other expenses. In contrast, nonprobate assets are typically transferred to the designated beneficiary or surviving owner much more quickly and at a lower cost. More about Probate.
Another advantage of nonprobate assets is that they are not subject to the same level of scrutiny as probate assets. During the probate process, a court must review the deceased person’s will and determine the validity of any bequests. This can lead to disputes among beneficiaries or other interested parties. Nonprobate assets, on the other hand, are transferred according to the terms of the contract or account and do not require court approval.
Despite the advantages of nonprobate assets, there are also some potential drawbacks to consider. One potential issue is that nonprobate assets may not be distributed according to the deceased person’s wishes if they have not been properly designated or if the designated beneficiary has predeceased the owner. In these cases, the nonprobate asset may become part of the deceased person’s probate estate and be distributed according to the terms of their will or state law.
Additionally, nonprobate assets may not be protected from creditors or other claims in the same way that probate assets are. For example, if a person has a judgment against them, their nonprobate assets may be seized to satisfy the debt, whereas probate assets are generally protected from creditors during the process.
In conclusion, probate and nonprobate assets are two different types of property and assets that are handled differently after a person’s death. Probate assets are subject to the probate process, during which a court determines the validity of a will and oversees the distribution of the deceased person’s property. Nonprobate assets, on the other hand, are typically transferred directly to the designated beneficiary or surviving owner without the need for court intervention. Understanding the difference between these two types of assets can be important for individuals who are planning their estates or for those who are responsible for administering the estates of loved ones who have passed away.