Assets Passing Outside of Probate
By Matthew D. Faulk - December 10, 2019
Based on experience, “probate” can be a dirty word. Poor communication, seemingly burdensome court procedures, and domineering executors are but a few reasons why so many have such desire to avoid the process altogether. At its basic function, probate is the court-overseen process to administer those assets the decedent solely owned at the time of his or her death to, among other things, ensure no fraud is committed during the administration of a decedent’s estate. So, what kind of assets can avoid the probate process? A few examples include:
assets owned as tenants by the entirety, or as joint tenants with right of survivorship (i.e., real estate, automobiles, and bank accounts);
assets which have a “transfer on death,” or “payable on death” designation (i.e., bank accounts); and
assets which have a designated beneficiary who is not the decedent’s estate (i.e., life insurance, retirement accounts, etc.)
In each of these examples, the law dictates these assets pass by operation of law, meaning that court oversight is unnecessary to ensure full ownership of and eventual control over the same by the surviving owner(s), or designated beneficiaries. Some steps may be needed to remove the name of the recently deceased owner, but that can typically be done without court involvement.
It is always a good idea for anyone who owns a bank or brokerage account, car, real estate, or other types of personal property, to have along with their estate planning materials, a spreadsheet of all the assets they own, and the manner in which those assets are owned. This will ensure two things: (i) make it easy on the family by centrally warehousing all primary information and (ii) such a list will assist an attorney in determining which assets must go through probate.
As an aside, do not think that adding others as co-owners to your accounts or other titled assets, or naming those you care about as beneficiaries, will get you to an optimal position. Though this may be an alternative to avoiding probate, you could instead be setting your beneficiaries (or even yourself) up for a rude awakening down the road. That will be the subject matter of next week’s blog post.