- September 15, 2022
- CLLB Law
- Estate Planning
Some assets pass through probate when an asset holder dies. However, not all assets must be forced into probate. Sometimes a will is not the ideal mechanism for ensuring that your assets are efficiently passed to your loved ones. We outline everything you need to know about the probate process and its effects on your assets.
What Is Probate?
Probate is the name of a legal process that is set in motion after someone with assets dies. The court analyzes the deceased’s estate and oversees the transfer of estate assets to the new owner. Probate can occur with or without a will. However, if a will is involved, its validity is also determined.
During probate, the court names an executor or legal representative to administer the probate process. Usually, the executor is a family member. Often, the will specifies the executor. The executor’s job is to locate and oversee the deceased’s assets, then estimate the estate’s value. There are two typical ways to evaluate the estate’s worth. One is by using the date of death. The other is by using an alternate valuation date, as laid out by the Internal Revenue Code (IRC).
The executor first must pay off any debt or taxes owed from the estate. After the estate’s inventory is taken and any debt and tax balances settled, the executor will ask the court to authorize distribution of the remainder of the estate to the beneficiaries.
Why Try to Avoid Probate?
People try to avoid probate mainly because of the time and money it takes to complete. Many people are also put off by the process itself, which is public. All debts and assets become part of the public record.
- Time. The probate process is slow and time-consuming. Hypothetically, you can complete it in as little as half a year, but it generally takes between one and three years. It can take even longer if someone contests the will or if it is a complicated case.
- Money. The probate process can be costly. The court may take as much as 10% of the estate’s value in probate fees. The court may use this money to conduct parts of the probate process or assign lawyers.
- Public process. All documents involved in the estate’s probate process become part of the public record. This means that anyone, from your neighbors to random thieves, can look up lists of the assets and see how they were distributed. This can be uncomfortable for anyone who receives assets of great worth. It can open people up to jealousy and requests for loans — not to mention scams and burglary.
Assets That Must Transition Through Probate
Some assets must transition through the probate process regardless of how the estate is arranged. This generally includes any assets only in the decedent’s name at the time of death. The probate court is the only entity that can change the title from the decedent’s name to the heir specified in the will.
Common examples of assets that often pass through probate because the title is in the ‘decedent’s name only’ include:
- Bank accounts
However, any assets that share another name on the title or account may not necessarily be forced into probate. Essentially, any asset not directly transitioned to a beneficiary will be subject to the decedent’s will. Wills are subject to probate.
Although there are assets that generally must pass through probate, an experienced New Albany probate lawyer may be able to help you arrange your estate in a manner that can allow all or some of your assets to effectively bypass probate.
Assets That Can Avoid Probate
Some assets naturally evade the probate process. Others can sometimes be arranged in a way so as to circumvent it. The following assets commonly avoid probate:
- Jointly owned assets
- Beneficiary designations
- Trust assets
Jointly Owned Assets
Assets jointly owned between the decedent and another person can sometimes avoid the probate process. For example, if you jointly own your home with your spouse and both names are on the title, the house may pass directly to the other spouse upon death.
Some assets with beneficiary designations can sidestep probate. These assets designate beneficiaries via contractual terms. They often include assets like:
- 401k plans
- Life insurance payouts
- Individual retirement accounts (IRAs)
- Medical savings accounts
- Pension plans
- Stocks and bonds
Some bank accounts even allow you to name beneficiaries. You can start by researching which accounts allow you to designate beneficiaries and then naming them on the respective accounts.
The most explicit way to avoid probate is by creating a living trust. This is an alternative to writing a will. A will distributes assets upon death, whereas a trust places assets “in trust.” The assets are managed by a trustee and paid out to the beneficiaries as designated.
When handled correctly, the assets are already distributed to the trust upon death, thereby sidestepping probate entirely. This allows your beneficiaries to avoid the costs commonly associated with probating a will and passing it through the probate courts.
Probate and Estate Planning Frequently Asked Questions
Do all assets have to pass through probate?
No, some assets naturally bypass probate. Others can be arranged in a manner that allows them to bypass probate. Speak with a skilled estate planning attorney for more information.
What assets go through probate?
When the following assets are listed in the decedent’s name only, they commonly pass through probate:
- Bank accounts
There are ways to avoid these assets having to enter the probate process, but it often requires active steps to be taken before death.
What assets do not go through probate?
Assets that do not go through probate commonly involve the following:
- Assets with joint ownership, like homes
- Assets with designated beneficiaries, like life insurance policies
- Assets designated as part of a living trust
In Indiana, an estate valued at less than $50,000 (IC 29-1-8-3) does not need to go through probate. An estate planning lawyer can help determine whether a living trust or a will is better for you and your beneficiaries.
What assets are considered part of an estate?
An estate is everything the deceased owned. This commonly includes assets like:
- Possessions like furniture, artwork, clothing, and jewelry
- Financial securities
If the estate is valued at under $50,000 (IC 29-1-8-3), it may not need to go through probate.
How Can an Estate Planning Lawyer Help?
We all want the peace of mind that comes with knowing our assets will be protected and distributed according to our wishes when the time comes. No amount of good intent can guarantee that your assets will be distributed according to your wishes; however, the proper legal considerations can help ensure your final wishes are followed.
If you wonder whether a will or a trust would be more beneficial to protecting and distributing your assets to your loved ones, an estate planning lawyer can help. At Church Langdon Lopp Banet Law Firm, we can answer your questions and assist you with all your estate planning needs. Call us at 812-286-2735 to find out how we can help.