Inheritance of assets after death can be confusing and challenging, especially due to unfamiliarity with the difference between probate and non-probate assets. Probate assets require court supervision for distribution after the owner’s death, whereas non-probate assets pass directly to designated beneficiaries or joint owners without court involvement.
Based on these two types of assets, you can also decide how quickly and efficiently you want your belongings to be settled and influence the heritage your loved ones receive. Let’s break down the basics of these two types and help you create a more efficient and comprehensive wealth transfer plan.
Key Differences Between Probate and Non-Probate Assets
A) Probate Assets
These assets are solely owned by the deceased with no designated beneficiaries. Examples of common probate assets include:
- Real estate that you own, either solely or as a tenant in common
- Bank accounts
- Automobiles, motorcycles, and other vehicles
- Personal belongings like artwork, furniture, and more.
- Investment accounts, such as stocks and bonds without transfer on death (TOD) designations.
- Ownership interests in businesses like sole proprietorships or shares.
How Probate Assets are Distributed: A Structured Legal Process
To distribute the probate assets, the supervision of a court is required. The process, known as “PROBATE,” ensures that all the deceased’s debts are paid & the remaining assets are divided fairly according to their will. Let’s have an in-depth look at the entire probate process:
1. Initiate the Probate Process
If there is a “Last Will”, it needs to be filed with the court to initiate the probate process. The court will verify the will’s validity and appoint an executor to manage the estate. Conversely, if there is “NO WILL,” the court will appoint an administrator, and assets will be distributed according to state intestacy law.
So, whatever the scenario—remember the appointed person is going to be responsible for managing the estate through the probate process.
2. Inventory and Appraisal of Assets
After submitting the will to the court, the executor’s or administrator’s next duty is to identify all probate assets owned by the deceased and determine the asset’s fair market value. The executor must have the asset appraised as it is necessary to establish the estate’s total value.
3. Settling Debts and Taxes
Before dividing the assets, the first duty of the executor is to pay all the decedent’s remaining debts, like medical bills, funeral expenses, and any taxes owed.
4. Distributing the Remaining Assets
Once all these debts and taxes are paid, the remaining probate assets are finally distributed to the beneficiaries (as outlined in the will). If there is no will, these assets are divided according to state intestacy laws to spouses, children, and other deceased closest relatives.
5. Closing the Estate With Court Approval
After all probate assets are fairly distributed, the executor or administrator will file a final accounting with the probate court and the estate’s closing request. Once it’s approved—the probate process is complete.
B) Non-Probate Assets
These assets are not solely owned by the decedent but are joint-owned with other individuals, i.e., designated beneficiaries or held in joint ownership with rights of survivorship. Examples of non-probate assets are:
- Jointly owned properties.
- Beneficiary-designated accounts like retirement accounts (IRAs, 401(k)s), life insurance policies, and annuities.
- Bank accounts with Payable on Death designations.
- Investment accounts with Transfer on Death designations.
- Living Trusts
- Accounts held jointly with rights of survivorship.
The distribution process of non-probate assets is quick and ensures that your assets are passed on according to your wishes with minimal legal hurdles.
Probate vs. Non-Probate Assets
Let’s have a look at key characteristics of probate vs. non-probate assets.
| No. | ASPECTS | PROBATE ASSETS | NON-PROBATE ASSETS |
| 1. | Cost | Due to court, legal, and administrator fees, the probate process is costly. | Lower costs as they avoid probate court fees and lengthy legal processes. |
| 2. | Privacy | Probate proceedings are public, i.e., anyone can access information about the estate. | Transfers are private, with no public record of the transaction. |
| 3. | Period for Transfer | It takes several months to years to complete the probate process. | Typically, immediately or within a few weeks. |
| 4. | Legal Protections | Provides a legal framework to address will contests and disputes among heirs. | Generally avoids disputes since assets pass directly to named beneficiaries or co-owners. |
| 5. | Accessibility | Executors and heirs can access court resources and legal advice throughout the probate process. | Beneficiaries have immediate access to assets. |
Hopefully, from the above-detailed differentiation, it’s quite clear that there are significant differences in the two types of assets. With this knowledge, you can better plan and structure your assets to minimize the complexity, time, and costs associated with the probate process and ensure a smoother asset transfer to intended beneficiaries after death.
If you are searching for a licensed probate lawyer near you with years of experience—contact Mazurek, Belden & Burke, P.C.! One of our seasoned attorneys will assist you throughout the process of estate administration, from settling estates to resolving legal issues faced in asset distribution.
Final Words
Complete knowledge of the difference between probate and non-probate assets is crucial to ensure that your estate’s contents are distributed as per your wish only after death. If you still have questions about probate or the different types of assets and their distribution, we recommend seeking professional advice.