The probate process is the judicial process in which a will or living trust is being accepted in the court of law. Since people acquire many different assets in their lifetime, there is often dispute over who is the rightful beneficiary of the assets when the owner passes away. When the probate process is complete, there will be a valid public document that lists how the assets will be divided up.
Most families prefer to keep their will out of probate. Unfortunately, many people do not update their trust and estate documents before passing away. When this happens or when the estate is greater than $150k, the beneficiaries are forced to go into the probate process.
Related Article: What is the Probate Process if You Die Without A Will or Trust?
What Types of Assets Are Subject to Probate?
Probate is necessary only for property that was:
- owned solely in the name of the deceased person—for example, real estate or a brokerage account (think stocks and bonds) in that person’s name alone, or
- a share of property owned as “tenants in common”—for example, the deceased person’s interest in a warehouse owned with his brother as an investment.
In the event that there is no mention of ‘separate property’ in the will, there is an even more complex probate process that takes place. Learn more about that process in this blog: What is the Probate Process if You Die Without A Will or Trust?
Assets Not Subject to Probate
Almost every person leaves behind some assets that do not need to go through probate. This should be seen as good news because the assets that are not subject to probate can be transferred to the people who inherit it much more quickly.
Below is a list of assets that do not need to go through probate:
- Retirement accounts—IRAs or 401(k)s—for which a beneficiary was named
- Life insurance proceeds (unless the estate is named as beneficiary, which is rare)
- Property held in a living trust
- Funds & U.S. savings bonds in a POD (payable-on-death) bank account
- Co-owned U.S. savings bonds
- Securities registered in TOD (transfer-on-death) form
- Real estate subject to a valid TOD deed (allowed only in some states)
- Pension plan distributions
- Wages, salary, or commissions (up to a certain amount) due to the deceased person
- Property held in joint tenancy with right of survivorship
- Property owned as tenants by the entirety with a spouse (not all states have this form of ownership)
- Property held in community property with right of survivorship (allowed only in some community property states)
- Cars or boats registered in transfer-on-death form (allowed only in some states)
- Vehicles, household goods, and other items that go to immediate family members under state law
Have More Questions?
Marcia L. Campbell, CPA are experts at creating balanced court accounting according to the probate code and providing in-depth analysis of the financial details in question.
If you have any questions, please don’t hesitate to contact us.