Where Does My Money Go When I Die?

by admin on March 6, 2011 in Family Law, FAQ

Justin Kavalir who practices  in estate planning, explains the difference between probate and non probate assets.

 Two types of assets – probate and non-probate.

When we talk about probate law in the estate planning context, we are talking about the types of assets we leave behind when we die.  One purpose of the probate process (or administration process) is to transfer the assets we leave behind that become part of our probate estate.  Assets that are part of a probate estate must generally be distributed through the probate process, which involves dealing with a court and a judge.  There are two general categories of assets we leave behind – probate assets and non-probate assets.

Non-probate assets

Non-probate assets are assets that do not become a part of our probate estate when we die.  They are transferred to someone else by operation of law – or automatically – upon death.  The three most common examples of non-probate assets would be 1.  Property owned in a tenancy by the entirety (or as joint tenants with right of survivorship); 2. Checking accounts or deposit accounts with a “POD” or “payable on death” beneficiary; and 3. Life insurance proceeds to a designated beneficiary.

When we own real property such as a home with a spouse, we generally own it as tenants by the entirety.  That means that upon death of one spouse, the other spouse becomes the sole owner of the property by operation of law.  No probate is necessary and no court intervention is required.  The same holds true for checking accounts with a POD beneficiary or life insurance proceeds with a designated beneficiary.  They transfer automatically and do not require any type of court proceedings.

This may seem simple enough, but part of the estate planning process involves making sure our non-probate assets are set up correctly.  While this article does not address many of the important tax implications of estate planning, it is worth mentioning that there are other options for disposing of ownership of the personal residence that may result in significant tax avoidance as opposed to simply defaulting to a transfer of ownership by operation of law.  In these situations, the advice of a lawyer and work on the front end can save substantial costs after death.

Probate Assets

In comparison to non-probate assets, probate assets can roughly be defined as “everything else.”  This would include cars, household furnishings, antiques, jewelry, guns, real property, and almost any other asset under the sun that does not specifically qualify as non-probate property.  The probate property that we leave behind becomes our probate estate and it must be distributed out of the estate to creditors and heirs through the probate process.  Depending on the circumstances, the probate process can be simple and straightforward or it can be complex and drawn out.  Regardless of the circumstances, however, the work of an experienced attorney is essential in the probate process.

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CONTACT US

Main:
224 S. 2nd St. Rogers, AR 72756


Ball Plaza:
112 W. Center Street, #555 Fayetteville, AR 72701
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