Probate vs. Non-Probate Assets: What’s the Difference?
If you’re going through a probate case, it’s best to understand the difference between probate assets and non-probate assets. What does it all mean?
Here’s a helpful guide to give you better clarity.
Introduction
I am sure you have heard some form of the statement, You can’t take your things with you when you die. And, hopefully, you have listened because it is true. No matter how much we’d love to take everything we’ve worked so hard for, all those cars, watches, shoes, cars, and more are left behind for our family members or beneficiaries.
But they don’t always go to our family – and they don’t always end up in the hands of the intended. Without proper estate planning, many of these assets may find themselves as part of the subject in a probate case. Many others may not.
Let’s take a look at probate assets – including non-probate assets – and determine what’s the difference.
What is Probate?
Probate is a court process that a deceased person’s estate goes through after they die. The court will analyze all the assets and make a call out for any creditors. It gets those who need to be paid, paid. And, when all is said and done, the remaining assets of the estate will be distributed appropriately.
If there is a will or a living trust, then the decedent has clearly stated their wishes as to who gets what. This makes it a bit easier as the court does not have to utilize the intestate succession laws in California to determine who should legally get the assets. Keep in mind that it is not uncommon for these laws to give a deceased person’s assets to someone who would never have been their choosing.
All in all, the probate process can last a couple of months or it can last a year or more. And though there are many probate cases throughout all of our court systems, it is a very public method of estate distribution. All of someone’s assets and debts are openly discussed.
Many people are under the impression that an entire estate is thrown into probate when someone dies. However, that is simply not the case – especially in California. Not everything in an estate is subject to probate. There are certain assets that are automatically included and those that are not.
Probate Assets
The assets that find their way into probate cases are those that include personal property and real estate that was owned prior to the date and time of death. Things like real estate, motor vehicles, vacation property, boats, furniture, art, jewelry, and household goods are all generally included. These tangible assets are a huge part of probate cases.
But probate cases also include intangible assets, too. Things like the money in checking and savings accounts, stocks, intellectual property rights, life insurance policies or brokerage accounts that list the decedent as beneficiary, and more are included in probate.
However, there is a catch. Probate only includes those assets that are owned solely by the decedent before death.
Non-Probate Assets
Assets that are owned by more than one person or between spouses are not likely to be included in probate, at least fully. Depending on the way real estate is titled, it could be shared with someone else or the decedent’s share may be transferred to the other party upon death. These would not be included in probate.
California is a community property state which means that property acquired during marriage becomes equally owned by both parties. After the death of one spouse, ownership moves to the other spouse entirely. That can keep it out of probate. Should something find its way into probate there are actions that can be taken. A lawyer can guide you with this.
In addition, those assets that list a beneficiary, such as a life insurance policy or retirement account, are not included.
The Breakdown
Just to recap, those assets that are sent into probate include those that are:
- The decedent’s separate property, as determined by the laws in California.
- Half of the decedent’s community property.
- The decedent’s share of property title as tenant in common with others.
Those not included in probate are:
- Life estates
- Assets that are in a trust
- Retirement accounts – or any accounts with a designated beneficiary listed.
- Pay on Death (POD) or Transfer on Death (TOD) Accounts
The Importance of Estate Planning
Thorough estate planning can significantly reduce the amount of time it takes for an estate to go through probate – or may keep it from having to go through it at all. As we discussed, the time it takes an estate to go through probate can be quite extensive – especially for a grieving family. And with assets being tied up, it can be tough to keep moving forward for those who relied on the deceased for support. Of course, we should also mention that when the court uses the law to determine who the decedent’s assets are transferred to, those who should have been intended may be left out.
All of this can be avoided. You can ensure that your family is taken care of if you plan ahead. Nobody wants to think about dying, but it is inevitable for all of us. By addressing these things now, you can make your death a bit easier on those you love.
How a Lawyer Can Help
You never want to take chances when it comes to distributing your estate after you die – especially if you have a family and those who depend on you. There are many ways you can plan your estate for the future – especially creating a trust so you can avoid probate altogether.
Estate planning can be tedious – and one false or incorrect move can undue everything you were working towards. In other words – don’t try to do it alone. Instead, work with an attorney. Securing the future of your loved ones for after you are gone is not something to take a risk with.
With the right guidance and the right tools, you can ensure that your assets will be distributed to exactly who you intend to have them – and in a very timely way. Find an experienced lawyer so you can rest easy about the future.
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