What Assets Avoid Probate?

When you think about estate planning, you likely focus on creating a plan that distributes your estate assets when you are gone. Although that may remain your primary estate planning goal, you will probably also include additional, related goals as your estate plan grows. One of those goals may be probate avoidance. Avoiding probate entirely may be impossible; however, with some careful planning you dramatically reduce the amount of time and money spent on the probate of your estate. Toward that end, the Essex Junction probate attorneys at Unsworth LaPlante, PLLC explain what assets avoid probate.

What Is Probate?

At the time of your death, you will leave behind an estate that consists of all the assets you owned or had an ownership interest in at the time of death. Probate is the legal process that many of those assets must go through before eventually being transferred to the intended beneficiaries or legal heirs of the estate. In addition, probate serves to identify, locate, and value those assets as well as notify creditors of the estate and provide them with the opportunity to file claims against the estate. Challenges to a Will are litigated during probate and all state/federal taxes paid before assets can be distributed to beneficiaries and/or heirs.

Avoiding Probate

Avoiding probate is a common estate planning for several reasons. First, avoiding probate allows you to keep details regarding the distribution of your estate private. Second, probate is time consuming. Probating even a modest and uncomplicated estate typically takes several months. Finally, probate can be expensive. Everyone involved in the probate of an estate, including the Executor/PR, attorneys, appraisers, real estate agents, and accountants, is entitled to a fee for their services. The cost of probate can significantly diminish the value of the estate that is ultimately distributed to beneficiaries and/or heirs.

Assets That Avoid Probate

The key to probate avoidance is to leave as few probate assets as possible at the time of your death. Not all assets are required to go through probate. By converting as many estate assets as possible to non-probate assets, or removing the assets from your estate entirely, your estate may escape a lengthy probate process. Common assets that bypass probate include:

• Lifetime gifts. By transferring assets to intended beneficiaries while you are alive you remove them from your probate estate as well as potentially gaining tax advantages.
• Trust assets. Assets held in a trust are non-probate assets and can be distributed immediately if the trust terms dictate. Most assets, including you home, can be held in a trust.
• Jointly held property with rights of survivorship. Jointly owned property, when titled correctly, does not go through probate. The key is that the property must be held jointly with rights of survivorship, allowing your interest in the property to pass directly to the co-owner upon your death.
• POD and TOD accounts. Most financial accounts, as well as investment accounts and securities, can be designated as “Payable on Death (POD)” or “Transfer on Death (TOD)” accounts which allows you to designate a beneficiary that will become the owner of the account upon your death. The beneficiary, however, will have no ownership interest in the asset while you are alive.
• Proceeds of life insurance. Proceeds from a life insurance policy are non-probate assets and can be distributed immediately.
• Retirement accounts. Most retirement accounts can be transferred directly to the named beneficiary without going through probate.

Contact the Essex Junction Estate Planning Attorneys

For more information, please attend one of our upcoming FREE webinars. If you have questions or concerns about including probate avoidance in your comprehensive estate plan, contact the experienced Essex Junction Estate Planning attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.