A part of estate planning is understanding how an individual’s assets are distributed when they pass. Usually, a decedent’s properties go through the probate process administered by an executor. If there is a will, the executor will distribute the properties according to its terms, subject to the court’s determination of the will’s validity. Without a will, the administrator will distribute the estate assets according to the state’s intestate succession laws.
However, some properties, called nonprobate assets, are excluded from the probate process.
Assets with designated beneficiaries
Properties that already have documented beneficiaries are exempt from probate. Typically, assets like pension plans, retirement and life insurance accounts have designated beneficiaries. Similarly, an account owner can also elect a beneficiary for their bank, investments and other financial accounts.
Since the owner already specified persons who will receive these properties in case of death, the funds and payouts will automatically transfer to the beneficiaries.
Jointly owned properties
If the decedent jointly owned an asset with a right of survivorship, the property can bypass the probate process. Instead, the property will transfer to the joint owner. This commonly applies to properties or businesses jointly owned by spouses, wherein when one spouse dies, the ownership transfers to the surviving spouse.
Properties in a trust
A person’s assets can skip probate if placed in a revocable living trust during their lifetime. The reason behind this is simply that the properties placed in the trust no longer belong to the guarantor.
The importance of knowing about non probate assets
It is no secret that the probate process can be challenging, lengthy and costly. The more properties to deal with, the lengthier the process can be. Having nonprobate assets helps the decedent’s family and loved ones go through a smoother and easier probate process.
