What Assets Bypass Probate?

When you pass away, your estate will go through the legal process referred to as “probate.” Probate serves several important functions, including the identification and valuation of your estate assets, payment of debts, and the eventual distribution of remaining assets to heirs and/or beneficiaries of your estate. Not all assets, however, go through probate. Understanding which assets do go through probate and which assets bypass is crucial when creating or updating your estate plan. With that in mind, the Indianapolis attorneys at Frank & Kraft discuss what assets are probate assets and which assets bypass probate.

Assets That Go Through Probate

Following your death, the person named as the Executor in your Last Will and Testament will initiate the probate of your estate. Part of your Executor’s job will be to identify, secure, and value probate assets. Generally, the more valuable and complex your probate assets are, the longer and more costly probate will be. Limiting the assets that need to go through probate is one way to reduce the time and money spent on probate after you are gone. Assets that are typically required to go through probate include:

• Solely Owned Assets: Assets that you own solely in your name are typically subject to probate and may include things such as bank accounts, real estate, and vehicles titled only in your name. Because there is no other party listed as an owner or beneficiary, these assets cannot automatically transfer ownership without court involvement.
• Personal Property: Items such as jewelry, collectibles, art, furniture, and other personal belongings are also probate assets unless you intentionally bequeath them outside of probate, such as through a trust.
• Assets Without Beneficiary Designations: Financial assets like bank or investment accounts that lack designated beneficiaries will also usually go through probate.

Assets That Bypass Probate

Certain types of assets can bypass probate, transferring directly to beneficiaries without the need for court involvement. Examples of assets that usually bypass probate include:

• Jointly Owned Assets with Rights of Survivorship: Jointly owned assets, such as real estate or bank accounts held in “joint tenancy with rights of survivorship,” bypass probate when one owner dies. The surviving owner(s) automatically inherits the decedent’s share, allowing the asset to transfer directly to them without going through the court.
• Assets with Beneficiary Designations: Many financial products, including life insurance policies, retirement accounts (such as IRAs and 401(k) plans), and some types of bank accounts, allow the account holder to include a beneficiary designation. Upon the account holder’s death, these assets transfer directly to the named beneficiaries, bypassing probate.
• Assets Held in Trust: Trusts are a common addition to the average estate plan and offer an effective way to bypass probate. When an individual places assets into a trust, they no longer legally own those assets. Instead, the trust now owns the assets. Upon the individual’s death, assets held in the trust are distributed according to the terms of the trust agreement without court intervention. This is particularly useful for large or complex estates and can provide additional benefits, such as reducing estate taxes or protecting assets from creditors.
• Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts: Certain types of bank accounts and investment accounts can be designated as “payable on death” (POD) or “transfer on death” (TOD) accounts. With this designation, the account holder names a beneficiary to inherit the account directly, bypassing probate. Unlike jointly held assets, however, the beneficiary of such an account has no ownership interest in the asset prior to the death of the owner.
• Community Property with Right of Survivorship: In some states, community property laws allow married couples to own property as “community property with right of survivorship.” Under this arrangement, a spouse’s share of community property passes directly to the surviving spouse upon death, bypassing probate.

Can We Help Your Assets Bypass Probate?

For more information, please join us for an upcoming FREE seminar. If you need assistance structuring your estate so that more assets bypass probate, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

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