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What is a Probate Estate?

Last update on: Jan 29 2021
By Katie Kao
Estate Planning

 

Probate is the legal process that ensures your debts are paid and legal title of the assets you owned at the time of your death are transferred to the appropriate heirs and beneficiaries. If you have a will, the probate process also will determine whether the will is authentic and valid.

 

Not all the assets owned by a decedent need to go through probate and so are not part of the probate estate. Some people structure their asset ownership so few or none of their assets are subject to probate. 

 

What assets are in a probate estate?

The following list details the assets that are required to go through the probate process in most states.

  • All assets held in the decedent’s name alone, including real and personal property and financial accounts.
  • All assets the decedent owned as a tenant in common with one or more other people. A tenant in common holds property together with other tenants in common. In this case, none of the surviving tenants in common automatically inherit the shares of a tenant who dies. Therefore, the decedent’s shares become subject to probate.
  • Assets that normally avoid probate but the designated beneficiaries for them already are deceased or beneficiaries weren’t designated. These assets might become payable to the estate and be part of the probate estate because there is no living beneficiary, or the estate becomes the designated beneficiary. Some examples include life insurance, health savings accounts, and retirement accounts.
  • Amounts which were owed to the decedent before death but paid after death. These can include the decedent’s last paycheck or money awarded from a lawsuit.
  • Personal items, household goods, jewelry and other items that don’t usually have a legal title document that is filed or registered.
  • Any interest in a partnership, corporation, limited liability company, or similar entity.

 

If these assets don’t go through probate, legal title to them is frozen and no one will have the legal authority to access these assets or transfer them to others. 

 

Which assets are not in a probate estate?

To avoid the costs and delays of probate, many people try to structure their asset ownership to avoid probate. The following are assets and forms of asset ownership that avoid probate:

  • Assets, usually financial accounts, with a payable on death (POD) or transfer on death (TOD) designation. The designation automatically transfers ownership to the designatee upon the death of the original owners by operation of law without having to go through probate. However, if the beneficiary predeceased the original owner and no new beneficiary was named, then these assets might still go through probate.
  • Assets held in joint ownership or joint tenancy with rights of survivorship.
  • Property held in a living trust.
  • Assets in which the deceased owned a life estate, giving the deceased the right to use and enjoy the property during his or her lifetime. Legal title automatically passes to the remainder beneficiary after the death of the life estate owner.
  • Assets that are contract rights and for which the deceased designated beneficiaries. Such assets include life insurance, annuities, and retirement accounts. However, if the named beneficiaries are predeceased, the assets might go through probate or be paid to the estate.

 

What is a Probate Estate: Key Takeaways

  • The probate estate contains all the assets that the decedent owned prior to his or her death that are not excluded from the probate by law. It includes assets held solely in the decedent’s name and might include assets that have no living designated beneficiaries.
  • Not all assets controlled by the decedent need to go through probate, such as assets held in joint ownership or through a living trust.
  • It is important to know which of the decedent’s assets are part of a probate estate to ensure legal title passes to the intended heirs.

 

 

Valuable contributions to this summary of “What is a Probate Estate?” were made by Bob Carlson, editor of the Retirement Watch financial advisory service and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets.

Katie Kao is an editorial intern with Eagle Financial Publications.

February 2021:

Congress Comes for your Retirement Money

A devastating new law has just been enacted, with serious consequences for anyone holding an IRA, pension, or 401(k). Fortunately, there are still steps you can take to sidestep Congress, starting with this ONE SIMPLE MOVE.
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