When preparing a plan for your estate, it is important to get a holistic understanding of both your assets and your debts. Assets come in many kinds, but, upon a person’s death, assets are classified legally as either probate or non-probate. The differences between these two kinds of assets are paramount when creating an estate plan. This is one of the reasons an experienced estate planning attorney needs a comprehensive understanding of your assets.
What is the Probate Process?
Before understanding the difference between probate and non-probate assets, it is important to understand the probate process. Simply, the probate process includes probating your will. Your will is then filed, and an independent executor or administrator will be appointed. The independent executor or administrator is responsible for collecting the assets and distributing them to any heirs according to the terms contained in your will, along with other duties and responsibilities.
What Are Probate Assets?
A probate asset is any asset that is distributed in accordance with the provisions contained in your will. These assets are traditionally held in your name alone, without a beneficiary designation or without a living beneficiary. A beneficiary is a someone designated or chosen by you to receive the benefits of your property. Generally, probate assets are passed through the will to an heir, rather than to a beneficiary. Examples of probate assets include bank accounts and real property solely in your name, together with personal property or effects, such as automobiles, jewelry, and home furnishings.
What Are Non-Probate Assets?
A non-probate asset is any asset that passes to a designated beneficiary you choose without involving in the probate process. The key difference between these types of assets is that your will does not control the distribution of non-probate assets because you have already chosen a specific beneficiary, such as a life insurance policy that you designate to go to your spouse upon your passing.
Other examples of non-probate assets are bank accounts that have either a transfer-on-death or pay-on-death provision, as well as retirement benefits that allow you to designate a beneficiary, such as a 401(k) or IRA plan. Rather than making a change to your will, like you would if you changed your mind on who will receive a certain probate asset, you would change your beneficiary designation. Changing your designation looks different for each kind of non-probate asset.
Why Does It Matter?
When creating an estate plan, you should consider both your probate and non-probate assets. It is important to understand your ownership interest property, both real and personal, to determine if your assets will be distributed in the way you wish and to the people you choose. Retaining an attorney with knowledge in estate planning is an essential part of this process.
Working with assets doesn’t have to be a stressful task. Let the experienced attorneys at Tessmer Law Firm help you along the way. Call us today at 210-368-9708 or schedule a consultation.