Probate is a legal process that involves a person’s assets after they die. If you have a detailed estate plan, including a last will and testament, what happens to your assets should be pretty straightforward for your beneficiaries. If not, or if there are arguments surrounding the will or beneficiaries, a probate court could be involved to settle these disputes. Some assets will be spared from probate, so it’s essential first to identify which assets will be subject to probate. This can help you create an accurate estate plan and settle any disputes prematurely. This article will cover:
- What is probate?
- What is non-probate property?
- Which assets go through probate?
- What does the probate process look like?
What Is Probate?
Probate is the legal process of dealing with a deceased person’s assets and debt, the court that oversees it, and the assets’ actual handling. The purpose of the probate process is to ensure wills are honored and any post mortem liabilities are taken care of. Paying debt can sometimes cut into the overall estate and take away from beneficiaries, depending on the value of assets, the number of beneficiaries, and the debt amount. Hiring a probate lawyer can help with any issues related to the will or beneficiaries, especially if you need to go to probate court to settle any disputes. Your property will be gathered and inventoried, any debts paid, and everything leftover will be divided among your heirs. Probate ends when all debt and taxes are paid and assets distributed.
What Is Non-Probate Property?
There are many assets in an estate that don’t need to go through probate. A probate court proceeding is typically unnecessary if the deceased person was married and owned almost everything jointly or did some planning to avoid probate. Once you identify everything outside of probate, the rest of the deceased’s assets are probably part of the probate estate. Here are some examples of non-probate property:
- Property with a named beneficiary, like life insurance policies, IRAs, 401(k)s, and pensions.
- Bank accounts with beneficiaries, if they have a payable on death designation.
- Property such as real estate, vehicles, cars, or boats if they have a transfer on death designation.
- Assets titled in the name of a trust or designating a trust as beneficiary.
- Property owned jointly with survivorship rights.
- Property held in a living trust.
- U.S. savings bonds registered in payable-on-death form.
- Co-owned U.S. savings bonds.
- Wages, salary, or commissions (up to a certain amount) due the deceased person.
- Property owned as tenants by the entirety with a spouse.
- Household goods and other items that go to immediate family members under state law.
Which Assets Go Through Probate?
Now that we know which assets are exempt from probate, let’s discuss which assets require probate. The deceased’s representative or attorney must list all probate assets with their values and then file the list with the probate court. This is the same as creating a list of assets for the will. Some of the assets will be easy to value, like bank accounts, while others might require an appraisal, like antiques or jewelry. The probate process will be much smoother if a will is created ahead of time, with a list of assets. Unlike a living will, which is also important, a final will and testament include legal directives and an inventory of assets.
States have different laws surrounding probate, which is essential to note. Probate is not required in some states if the estate’s value is below a certain amount. Some states even have a simplified probate procedure for smaller estates or when all the property is transferred to the surviving spouse. Sorting through accounts and property can be a very tedious job, and it’s not always easy to tell what will be subject to probate and what isn’t. Seek legal advice if you have questions surrounding property and probate court. Even when probate isn’t required, going through the whole process can have some advantages. Probate assets typically include:
- Real estate, vehicles, and other titled assets that are owned solely by the deceased person.
- A share of property owned as “tenants in common” with someone else.
- Personal possessions such as household items, including clothing, jewelry, and collections.
As you can see, the list of items subject to probate is a lot shorter than the non-probate property. It can still be a lot of items to catalog though, especially when you consider household items alone. When there are assets that require probate court proceedings, the will executor’s responsibility is to open the case in probate court and see it to the conclusion. When there is no will, or the will hasn’t named an executor, the probate court will appoint someone to serve. Either way, the person in charge can hire a lawyer to help with the proceedings and pay any fees to the lawyer using money from the estate.
The Probate Process
You might be wondering what the probate process looks like. In Minnesota, it’s a long list of steps. Having the help of a lawyer can make the process much smoother, as they will guide executors through every step of the process. If you have never been an executor before or don’t know where to start, seeking legal counsel is the best first step. Here is a look at the probate process in Minnesota:
- File proper documentation with the court to commence administration.
- Contact beneficiaries and heirs.
- Obtain tax ID for the estate.
- Open bank account for the estate.
- Inventory estate assets.
- Sell assets if necessary.
- File last income tax return of the deceased.
- Prepare federal and state income tax.
- Prepare fiduciary accounting.
- Distribute assets.
- Finalize probate through proper documentation.
Creating a detailed last will and testament will make the probate process a lot easier for your executor and beneficiaries. But if the deceased does not have a will, or there are disputes surrounding their assets, the probate court can settle these arguments. Knowing which assets will be subject to probate and which will not can help you make a detailed estate plan in the first place, or identify how you need to proceed through the probate process.