When you plan your estate, it is crucial to comprehend the distinction between probate and non-probate assets.
The probate process involves administering a deceased person’s estate and distributing their assets. In contrast, non-probate assets bypass probate and directly distribute to beneficiaries. Understanding the difference between these asset types can help you design your estate plan more efficiently.
Probate assets are assets that the deceased person owned solely and did not assign to a beneficiary. Real estate, bank accounts and personal property are some examples of probate assets. Typically, the probate process distributes these assets according to the deceased person’s will. If there is no will, state law determines the asset distribution. Probate can become a lengthy and costly process because it involves court and legal fees.
Non-probate assets are assets designated to a specific person or entity by the deceased person and directly distribute to beneficiaries without undergoing probate. Life insurance policies, retirement accounts and jointly-owned property are some examples of non-probate assets. When a person dies with non-probate assets, the designated beneficiaries receive the assets.
Understanding the distinction between probate and non-probate assets is essential when planning your estate. If you have significant probate assets, you can ensure that your assets distribute according to your wishes by creating a will or trust. For non-probate assets, keeping your beneficiary designations up to date is essential to guarantee that your assets distribute to the correct beneficiaries.
Probate and non-probate assets are two distinct types of assets handled differently in the estate planning process. By understanding these asset types’ differences, you can create an estate plan that guarantees your assets distribute according to your wishes.