When probating an estate, not all assets of the decedent can be probated. Those assets which are subject to probate are known as probate assets.
A probate asset is any asset which you own in your name alone, having no beneficiary designation in the document of ownership.
If the ownership of your car, piece of art or business bears only your name (nothing like Smith and sons, or Mr. and Mrs. Phil Berger), then you have to write down in your will who these assets will go to. And so the court has to verify your will if it is valid so that your instructions can be followed.
In the absence of a will, your wishes are not known and there is room for your family to squabble over your property. To avoid this, the court has to conduct probate all the same, invoking your State’s law of intestacy to determine who legally has a share in your estate.
Your share in a property is also liable to be listed under probate, so long this share can be removed from the whole without ruining it. A good example is your interest from an investment owned between you and others. Such ownership is termed “tenants in common”.
Typically, only probate assets can go into your will. And most states have a threshold for probate. If your estate (the total value of your probate assets) does not surpass the threshold, then probate will not be conducted. The threshold is $30,000 in New York and $75,000 in Florida.
Assets which are not liable to be listed under probate
Assets that do not fall under probate are referred to as non-probate assets. These include:
- Assets held by joint tenancy with rights of survivorship
- Retirement accounts and life insurance
- Accounts with payable-on-death bank account, and any other asset with beneficiary designation.
- Assets held in trust
- Household goods.
These assets are not liable to be listed under probate because they either bear the name of a trust (rather than your name) or have beneficiary designation, or held jointly with some other person who has full claim to the property when you pass away.
Small estate administration
When the total value of an estate does not reach the state’s threshold for probate, a simpler administration is used to officially distribute properties. This system is known as a small estate administration.
A small estate administration is typically much quicker and simpler than probate. Hence, your loved ones wouldn’t have to go through unnecessary stress.
The truth is you can take advantage of the small estate administration. Let’s assume the threshold in your state is $30,000 but the total value of your estate is $500,000. Now, such an estate (which is the sum total of the value of all that you own) at first glance qualifies for probate. But if you own $300,000 in a living trust, $100,000 in a payable-on-death account, $80,000 in IRA, that leaves only $20,000 subject to probate. But since this value is less than the threshold, you have just successfully escaped probate.
This is especially advantages for high net worth individuals whose estates are very complex. Imagine having real property in multiple states. Probate would have to be conducted in each state, posing a real financial, physical, and mental burden for your family and executor. So it is advisable to hold such assets in a living trust or by joint tenancy to avoid probate.
What happens during probate?
During probate, the executor named in your will (or one appointed by the probate court in the absence of a valid will) will have to perform certain duties on your behalf.
- Filing a petition to the probate court for probate to commence
- Notifying your family members, relatives, creditors, and all other interested parties that probate has commenced
- Filing tax return forms on behalf of the estate
- Paying income and estate taxes, estate debts, final expenses, probate court fees, attorney charges, etc.
- Distributing the remaining assets to the beneficiaries (or heirs-at-law in the absence of a valid will).
Get help from an estate planning attorney near you
Strategic Estate planning can ease your loved ones of so much burden when you pass away. And to do strategic planning requires experienced hands. An estate planning attorney can give you all the help you need. In the long run, the cost of hiring one will be so worth it to your estate and your loved ones.
Need an estate planning attorney in New York? Give us a call.