When a person passes away, heirs and beneficiaries receive their assets through the legal process of probate. However, not all assets must go through this process.
Understanding the difference between probate and non-probate assets can help to prepare for the probate process and making it as easy as possible for those left behind.
Probate assets
Probate assets are those the deceased solely owns. They also do not have a designated beneficiary. The probate court distributes these assets according to the terms of the deceased’s will. If there is no will, the court uses state law. Probate assets can include real estate, vehicles, bank accounts and personal belongings.
Non-probate assets
Non-probate assets are those that pass directly to a designated beneficiary upon death. These assets will have a beneficiary designation or joint ownership. Common examples of non-probate assets include life insurance policies, retirement accounts and assets in a living trust.
Probate vs non-probate assets
One of the main benefits of non-probate assets is that they can pass to beneficiaries more quickly and with less cost than probate assets. Beneficiaries receive them relatively quickly, which allows for a smoother transfer of assets.
Non-probate assets are not always the best option for every situation. In some cases, probate assets may offer more flexibility or tax advantages.
The difference between probate and non-probate assets is distinct and has a great impact on what will happen in probate. By carefully planning and managing assets, a person can ensure that they pass on to heirs following the most beneficial path.
