Welcome back to the second post about non-probate assets. In the first post we talked about the probate process, which can occur if you have a will. If you do not have a will, it is the only way the courts can distribute your assets according to state guidelines. We also covered items that are considered probate assets. These include property and items that only the deceased owned.
Non-Probate Assets | Estate Lawyers in Cary NC
Now, our estate lawyers in Cary NC will take a look at non-probate assets. In general there are six different types, which we will outline below.
- Assets that you own with your spouse, a sibling or adult child will avoid probate through rights of survivorship. Joint tenants with right of survivorship is when two or more people own the title together. When one dies, the survivor becomes the new owner. It can be used in real estate, bank accounts, investment accounts, and stocks and bonds.
- If you have assets that you own jointly with a spouse in states where tenants by the entirety (TBE) are recognized, then they will avoid the probate process. When one spouse dies, the ownership of the property immediately transfers to the surviving spouse. It depends on state laws, but it can be used for real estate as well as bank accounts and investments.
- If you have assets in your name only, but there is a payable on death (POD), transfer on death (TOD), or an in trust (ITF) designation then it is considered a non-probate asset and will avoid the process. Examples include health savings accounts, deeds deemed TODs or beneficiary deeds. Note that if the person named beneficiary dies before you, then the assets are subject to probate.
- Having a life estate, which is when you own property only during your lifetime, can help you avoid probate on those assets. It is used in cases where one person wants to have control of an asset, such as property, while he or she is alive, but then it will go back to the original owner upon that person’s death. For example, one party in a divorced couple may want to allow the other to live in the home he or she owns while alive. But when that person passes away, the home will go back to the owner or to someone else he or she has designated, such as children
- If you have a revocable living trust with assets that have been transferred into it, those are not subject to probate. In order for it to avoid probate, the trust has to be funded by those assets. If you have assets that were supposed to be transferred, but were not for some reason, then they will be subject to probate. It is important when you create a trust that you fund it so it is valid.
- Other non-probate items include assets that are payable upon death, such as life insurance policies, retirement accounts such as 401(k)s, IRAs and annuities. If the beneficiary named predeceases the owner, then they would be subject to probate.
When planning your estate, you may want to consider which assets are subject to probate and which are not so that you can make the best decisions in how you designate heirs. If you need additional help, reach out to our estate lawyers in Cary NC to ensure that you are creating the best plan for your situation.