When it comes to matters of probate, many people think the assets involved in include everything that was owned or controlled by the deceased. This is actually not the case.
As the vast majority of assets connected to the deceased certainly will fall under probate jurisdiction, it will be easier and more comprehensive to discuss which types of assets are not included in the probate matter.
The deceased assets can be divided into three main categories:
1) Joint Tenancy with rights of survivorship
2) Tenancy by the entireties
3) Community property (which only applies in some states, including Nevada, California, etc.).
A main considerations for probate is how a house, especially if in disrepair, gets sold. Do read up on the Chrysalis factor ==> , cash a deal or not a deal, covered in our earlier article.
Let’s discuss each of these categories in layman’s terms and then look at a sample of assets that are exempt from probate.
Joint tenancy with rights of survivorship. Right of survivorship determines what happens to a jointly owned asset after one of the parties has died. Simple example: a joint bank account held by a married couple, and the husband has passed away. The determined right of survivorship would go to the spouse, especially in cases where the will has specified such an action. You might think this is a foregone conclusion, but many probate cases where the will does not specify the determination of right of survivorship have been contested for one reason or another.
Tenancy by the entireties. This is similar to joint tenancy with rights of survivorship with one key difference: tenancy by the entireties deals largely in matters of real estate where a surviving beneficiary is listed as a joint owner of the asset. In some states, it is used only for married couples, but others have more loosely defined parameters for joint ownership and tenancy.
Community property. You may have heard of this term in matters of divorce. It pertains only to those states with community property laws and is treated similar to divorce in that the same kinds of standards apply. Such laws only apply to married couples and generally give automatic ownership of assets to the surviving spouse. As mentioned above, this only applies to states with community property laws (specifically, Alaska, Arizona, California, Idaho, Nevada, Texas, or Wisconsin).
Now that we’ve defined out terms, let’s talk specifics.
- Retirement accounts for which a beneficiary is specified in the will.
- Life insurance proceeds.
- Jointly owned property (as in property owned by the deceased and a still living person).
- Funds in a “payable upon death” bank account.
- Securities that have been registered with a “payable upon death” form.
- Jointly owned U.S. savings bonds.
- Real estate (when specified in a will, jointly owned, or subject to community property laws).
- Pension plan distributions.
- Unpaid wages, salaries, or commissions owed to the deceased (up to a certain amount, which varies by state).
- Vehicles registered with a “transfer upon death” form, or specified in some states, immediate family members.
- Household goods etc. and similar items, which are automatically transferred to immediate surviving family members under state law (although some states do not have such laws).
The above is a list of the kinds of assets that do not need to go through probate and the reasons why not.
The best way to minimize probate matters for you and your surviving family members is to have a will in place, which you can change as your life circumstances warrant.
If you are considering opening a probate case, take a look at the list above and determine what it is you wish to dispute regarding the deceased person’s assets or whatever is specified in the deceased’s will.
Knowing what is not subject to probate law is just as important as knowing what is.