If you are considering getting your estate plan in order, it will be important to distinguish the differences between probate and non-probate assets.
Knowing the difference between the two is important because it will affect how your final wishes are carried out. Probate is the process by which the court determines how to distribute your property following your death. When your assets are distributed to your heirs through the court, this is probate, when some assets do not go to court but go directly to your beneficiaries, this is non-probate.
The process of going through probate will include filing a will and having an executor appointed to administer the collections of assets, bill paying, filing taxes and distributing property to heirs.
After you pass, assets solely owned by you that go through probate can include:
- Personal property items such as automobiles, jewelry or furniture
- Bank accounts in your name
- Real estate in your name
- Life insurance or brokerage accounts that list you or your estate as beneficiary
- An interest in a corporation, partnership or limited liability company
The following is a list of non-probate assets:
- Assets you own in your name that have a payable on death (POD), in trust for (ITF) or a transfer on death (TOD) designation.
- Assets you have joint ownership with your spouse or in a special ownership that is called tenants by the entirety (TBE).
- Assets owned in a trust
- Retirement accounts
- Brokerage and life insurance accounts that list another name besides yours as the beneficiary
Before you take on the task of estate planning, it is important to understand the differences between probate and non-probate property. Keep in mind that a will cannot regulate the dispensing of non-probate property. You should remember to check your accounts and property to determine that property you own jointly with someone else will be distributed according to your final wishes.