Understanding Which Assets Automatically Skip Probate

When an estate is exposed to probate, the entire situation can get messy. Families often end up fighting, and the private nature of your hard work can be completely stripped away. The courts will sift through the fine details of an estate plan to ensure everything is in order and executed legally.

We’ve previously discussed how trusts generally avoid probate but can still sometimes be exposed. Some individual assets, however, automatically avoid probate as long as you’ve taken the necessary steps to transfer ownership through other means.

Bank Accounts

We don’t want people sticking their noses in our bank accounts unless absolutely necessary. Putting personal bank accounts through probate would expose our personal financial decisions to unnecessary scrutiny.

Thankfully, bank accounts will almost always have two ways to avoid probate: joint ownership or designated beneficiaries. If you hold a bank account jointly with another person when you pass away, the other person will assume ownership of the account. The same applies if you have your own account but have designated a beneficiary through your financial institution. This is often referred to as “payable on death.” However, if you designated a beneficiary who is no longer able to assume ownership of the account due to either death or incapacity then the account may be exposed to probate.

Insurance Benefits

The same rules as bank accounts apply for leftover insurance benefits. Any remaining benefits left in medical or life insurance policies will transfer without being exposed to probate as long as beneficiaries have been properly designated.

Annuities, IRAs & CVs

Similar to bank accounts and insurance policies, your financial investment accounts also likely have a beneficiary designation.

One important aspect of estate planning to understand is that accounts that have a beneficiary designation will generally supersede any language written in a will. For example, if you have a beneficiary designation for an IRA through the account/institution itself, any beneficiary designations in your will for the same account will be considered null and void.

Property Owned By Spouses

The right to survivorship prevents your home and other properties from being exposed to probate as long as your spouse is still alive at the time your estate is executed. This means your home will remain in your spouse’s name without having to go through probate.

It’s important to verify the specific language designating joint ownership and the right to survivorship, however. If you own property that doesn’t specifically provide this then your portion of the property may be exposed to probate. In this case, your spouse keeps their portion of the property but your portion could be contested in probate and end up in someone else’s hands.

If your spouse predeceases you and you never remarried then the entire property will be exposed to probate unless you pass it through a trust. You should sit down with an estate planning attorney to review documentation such as this to ensure you get the full advantage of the right to survivorship.

At Zamora, Hillman & Villavicencio, experience and knowledge are present in our legal representation. Our goals are based on the needs of our clients and we approach each matter with the utmost care and importance. Contact us today to make sure your estate is in the right hands.

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Zamora, Hillman & Villavicencio

Our firm deals with legal matters involving your loved ones, and our familial operation is prepared to give you caring and effective counsel during what might be a difficult or emotional time.

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