What is Probate?
Probate is a structured court-supervised process for identifying and collecting the assets of a decedent’s (deceased person) estate, distributing the decedent’s assets, and paying debts owed to creditors. First, the decedent’s assets are used to pay for the costs of the probate proceeding. Second, the decedent’s funeral expenses. Third, the decedent’s outstanding debts. Lastly, the remainder of the assets are distributed amongst the decedent’s beneficiaries.
*** Disposition of Personal Property Without Administration – In very limited circumstances, there is a non-court supervised administration proceeding.
What Are Probate Assets?
Probate assets are assets that were owned by the decedent, exclusively. In order for an asset to become a probate asset, it must be in the decedent’s sole name upon their death. Additionally, if the asset is owned by the decedent and one or more co-owners and lacked a provision for automatic succession of ownership upon death.
Some examples of probate assets may include:
- Bank Accounts
- Investment Accounts
- Annuity Account payable to the decedent’s estate
- Real Estate held as Tenancy in Common
- Tangible Personal Property
- Business Interests
- Beneficiary Assets with Predeceased beneficiaries or no beneficiary designated
- Assets left out of a trust
Some examples of NON-probate assets may include:
- Property held in a trust
- Life insurance proceeds (unless the estate is named as a beneficiary)
- Property held in a living trust
- Retirement Accounts
- 401K – When a beneficiary is named
- IRA – When a beneficiary is named
- POD – Payable-on-Death Bank Account
- TOD – Transfer-on-Death Form
- U.S. Savings Bond registered in payable-on-death Form.
- Co-owned U.S. Savings Bonds
- Pension Plan Distribution
- Wages, Salary, or Commissions owed to the decedent.
- Real Estate – held in Joint Tenancy With Right of Survivorship
- Real Estate – held in Tenancy by the Entirety
The two above-mentioned lists are not all-inclusive. The lists are intended to illustrate common probate and non-probate assets.
Why is Probate Necessary?
Probate is fundamental to pass ownership of the decedent’s probate assets to the decedent’s beneficiaries. If the decedent died with a valid will, the will is admitted to probate in court. If the decedent died without a will, without a valid will, or the will is not admitted to probate in court, a will (or lack thereof) is ineffective to pass ownership of probate assets.
For a number of reasons, the decedent’s affairs must be closed to wind up their life. Estate administration of the decedent’s estate will ensure that the decedent’s creditors are paid if certain procedures are correctly obeyed.