Losing a loved one is never easy. Besides the emotional turmoil, there are practical matters to attend to, such as settling their estate. One of the first steps you may encounter in this process is understanding the difference between probate and non-probate assets. Knowledge of the difference between these two types of assets may help simplify the estate administration process.
What are probate assets?
Probate assets are those that a deceased person owned solely in their name at the time of death, without any designated beneficiary or joint owner. These assets must go through probate, a court-supervised process that authenticates the last will and testament of the deceased, if one exists, and settles the estate. Examples of probate assets include:
- Real estate solely owned by the deceased
- Personal property like jewelry, furniture or vehicles
- Bank accounts solely in the deceased’s name
- Stocks and bonds in the deceased’s name
A probate typically involves filing the will with the local court for verification. If there is no valid will, the court will appoint an administrator for the estate. They will notify heirs and creditors and create an inventory of the estate’s assets. Depending on the estate’s complexity, this process can be time-consuming and costly.
What are non-probate assets?
To put it simply, non-probate assets bypass the probate process. They transfer directly to the beneficiaries upon the original owner’s death. These assets have designated beneficiaries or are co-owned. This makes the transfer straightforward. The following are some common examples of non-probate assets:
- Life insurance policies with named beneficiaries
- Jointly owned property with rights of survivorship
- Retirement accounts like IRAs and 401(k)s with designated beneficiaries
- Payable-on-death (POD) and transfer-on-death (TOD) accounts
In Virginia, non-probate assets can often be transferred quickly and without court involvement. For example, a jointly owned house would automatically transfer to the surviving owner upon the death of one party.
Why knowing the difference matters
Being aware of the distinction between probate and non-probate assets is essential for efficient estate administration. Probate can be lengthy and costly, while non-probate assets generally offer a quicker, simpler transfer process. As you navigate the complex process of estate administration, consider seeking guidance from a legal professional to ensure that you’re handling the estate correctly. They may also help in avoiding potential estate administration pitfalls that may lead to complications.