3 Types of Assets That Don’t Go Through Probate
One of the first things people are concerned about when they start to consider estate planning is how to avoid probate.
Probate can be an extensive process that ties up estate assets for months or even years. Many people want to ensure that their loved ones will have immediate access to funds and other assets they might need to cover their lifestyle.
Not all assets go through probate. With proper planning, you may even be able to keep all of your assets out of probate using trusts and other estate planning tools.
Learn more about three types of assets that don’t go through probate below.
Payable-on-Death Accounts
Payable-on-death accounts don’t go through probate at all. The assets in such accounts transfer to the beneficiary or beneficiaries named on the account once it is established that the account holder has passed away.
Some common examples of payable-on-death accounts include:
- Checking and savings accounts at traditional banks, credit unions, and online banks
- Certificates of deposit at your bank (also called CDs)
- Certain types of investment accounts
- Individual retirement accounts (also called IRAs)
To ensure that your payable-on-death account transfers to your beneficiary outside of probate, you must name a beneficiary. You can do so easily with most accounts. You simply have to fill out a beneficiary form. Ask your bank or investment broker about this option so you can complete the form. You may also be able to complete the form online.
In many cases, you can add multiple beneficiaries. For example, if you have three adult children and you make them all beneficiaries to your checking account, each would receive an equal portion of those funds upon your death. Some institutions let you set a percentage of funds the beneficiaries receive. For example, you could allocate 50% to one beneficiary, 30% to another, and 20% to a third.
You can also usually change your beneficiary designations at any time. You simply need to complete a new beneficiary form to replace the old one or go through your financial institution’s process for editing the old form.
Jointly-Held Property With Right of Survivorship
If you own property with someone else and there is a right of survivorship, that asset typically passes to the other owner upon your death. One common example of this is a jointly held bank account. Consider the example where two spouses have a joint bank account. In many cases, the assets in that bank account will pass to the surviving spouse when the other spouse passes away.
Another example is a jointly-owned home. If two spouses own a home together and there is a right of survivorship, the ownership of the home goes to the other spouse when one passes away.
Note that there has to be a right of survivorship. Without that, the portion of the asset that the deceased person owns doesn’t automatically pass to the other joint owner. Instead, it passes to that person’s heirs according to estate law or any will or other estate plan in place. For example, if two people own a business together and one of them dies, the part of the business they own may not pass automatically to their partner.
Assets in a Trust
Assets in a trust don’t go through probate because they aren’t actually owned by the deceased person or, subsequently, their estate. Assets in a trust are owned by the trust and are used for the benefit of the beneficiaries of that trust.
There are many ways you can protect your assets in a trust to keep them out of the probate process. Trusts also have the added benefit of providing some protection against creditors and taxes and letting you stipulate how heirs might use assets you leave them.
Probate Isn’t the Only Concern Related to an Estate’s Assets
Avoiding probate can be helpful. It cuts down on expenses the estate has to pay and can increase how much you leave your beneficiaries. It also reduces the stress loved ones might face in settling your estate.
However, avoiding probate isn’t the only thing you should be concerned about if you want to protect your assets for the future and leave a legacy for loved ones. For example, if you need long-term care as you age, your estate might be diminished by Medicaid estate recovery. You can reduce the chances or impact of this with proactive Medicaid and long-term care planning.
Work With an Estate Planning Attorney to Protect Your Legacy
Avoiding probate is possible, but it isn’t always easy — especially without experienced legal assistance. You might think you can just ensure all your assets are in joint accounts or jointly owned, but overlooking a seemingly simple detail can change how it all plays out in probate.
Instead of guessing your way through DIY estate planning, consider working with an experienced legal team. An estate lawyer can provide recommendations about how best to protect your assets and how you can use trusts to do so while you’re still alive and for your heirs later.
If you want to start the process of estate planning and enjoy the peace of mind of protecting your assets legally, contact Crow Estate Planning & Probate at 615-558-8002 today to make an appointment to see how we can help.