What Assets Bypass the Probate Process? Frank & Kraft Attorneys at Law
When your estate passes away, it will go through a legal process called “probate”. Probate performs several important functions including the identification and evaluation of your estate assets and the payment of debts. It also distributes any remaining assets to your heirs or beneficiaries. Not all assets are subject to probate. When creating or updating an estate plan, it is important to know which assets go through probate. With that in mind, the Indianapolis attorneys at Frank & Kraft discuss what assets are probate assets and which assets bypass probate.
Assets That Go Through Probate
Following your death, the person named as the Executor in your Last Will and Testament will initiate the probate of your estate. Your Executor will have to identify, secure and value your probate assets. In general, the more complex and valuable your probate assets, the longer the probate process will take and the more expensive it will be. To reduce the amount of time and money spent in probate, it is important to limit the assets that must be probated. Assets that are typically required to go through probate include:
- Solely Owned Assets: Assets that you own solely in your name are typically subject to probate and may include things such as bank accounts, real estate, and vehicles titled only in your name. Because there is no other party listed as an owner or beneficiary, these assets cannot automatically transfer ownership without court involvement.
- Personal Property: Items such as jewelry, collectibles, art, furniture, and other personal belongings are also probate assets unless you intentionally bequeath them outside of probate, such as through a trust.
- Assets Without Beneficiary Designations: Financial assets like bank or investment accounts that lack designated beneficiaries will also usually go through probate.
Assets That Bypass Probate
Certain types of assets can bypass probate, transferring directly to beneficiaries without the need for court involvement. Examples of assets that usually bypass probate include:
- Jointly Owned Assets with Rights of Survivorship: Jointly owned assets, such as real estate or bank accounts held in “joint tenancy with rights of survivorship,” bypass probate when one owner dies. The asset is transferred directly to the surviving owner without the need to go through a court. Assets with Beneficiary Designs:
- Many products, such as life insurance policies, retirement plans (such IRAs and 401k) plans), some types of bank account, and many others, allow you to designate a beneficiary. These assets are transferred directly to the beneficiaries upon the death of the account holder, bypassing the probate process. Assets in Trust:
- A trust is a common addition to an estate plan. It offers a way to avoid probate. When an individual places assets in a trust, that person no longer owns those assets. The trust now owns these assets. This is especially useful for large or complex estates and can provide additional benefits, such as reducing estate taxes or protecting assets from creditors. This is particularly useful for large or complex estates and can provide additional benefits, such as reducing estate taxes or protecting assets from creditors.Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts:
- Certain types of bank accounts and investment accounts can be designated as “payable on death” (POD) or “transfer on death” (TOD) accounts. This designation allows the account holder to name a beneficiary who will inherit the account directly and bypass probate. Unlike jointly held assets, however, the beneficiary of such an account has no ownership interest in the asset prior to the death of the owner.Community Property with Right of Survivorship:
- In some states, community property laws allow married couples to own property as “community property with right of survivorship.” Under this arrangement, a spouse’s share of community property passes directly to the surviving spouse upon death, bypassing probate. Join us for a FREE seminar to learn more about how we can help your assets bypass probate. Call Frank & Kraft
for an appointment if you need help structuring your estate to ensure that more assets can bypass probate. Read More!
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