When it comes to estate planning, it’s important to keep in mind which assets can wind up going to probate.
What Is Probate
According to the American Bar Association, probate refers to the formal legal process used by a state that officially recognizes the contents of a will while appointing a personal representative (also known as an executor) to handle the distribution of assets to the intended beneficiaries.
In other words, the probate process confirms the authenticity of a will and/or estate planning while ensuring the right people end up with the intended assets.
Depending on the state laws in question, some assets can sidestep the probate process by being specifically listed in the estate plan.
Assets Avoiding Probate
- Joint Assets
Joint assets refer to any asset that has more than one owner listed on the deed and/or user agreement. This works because, in the event, one owner passes away, the asset in question still has at least one other person actively maintaining ownership of the asset.
For example, if two people own a house, and one person passes away, the surviving owner does not automatically lose the house since they jointly owned the home. Again, the laws of the state in question may require further steps to ensure the home would stay out of probate, but jointly-owned assets come with their own solid legal argument.
Such assets may include
-Home dwellings (houses, summer homes, condominiums, etc.),
-Joint bank accounts with multiple names on the account (just because you use the account doesn’t mean you co-own the account).
-Vehicles with multiple owners are listed on the title.
-Any stocks, bonds, or accounts with multiple listed owners.
- Designated Assets
Also sometimes referred to as “Named Beneficiaries,” designated assets can avoid the probate process by essentially claiming “dibs” on a given asset.
For example, if you have an active bank account or an insurance policy, you should have the option to name a beneficiary for that account in the event something happens to you. Doing so allows your named beneficiary to assume ownership of the account without having to go through the probate process to confirm the legality of the new ownership.
Even so, it’s smart to work with an experienced estate planning attorney in Carlsbad, like Andrew Fesler to have some understanding of your state’s probate process when designating assets. The state may impose some restrictions on asset disbursement, such as a short waiting period before recognizing new ownership or having alternative plans in the event the named beneficiary cannot assume ownership of the asset.
Some situations can force the executor to seek new owners for the asset in question. If the named beneficiary happens to be medically incapacitated, for example, the executor may have to reward the asset to another beneficiary.
- Assets Named in Living Trusts
Living trusts work a little like a bank savings account. The assets in question can be handed off to a trustee charged with maintaining and safekeeping the asset until they can be claimed by the named beneficiaries. Because the assets in question have been placed in a trust, they have technically already been distributed, allowing them to bypass the probate process.