What is the Difference Between Probate and Non-Probate Property?
July 23rd, 2018
The distinction between probate and non-probate property is an important one for the purposes of estate administration. Essentially, probate property must go through probate court proceedings in order to be distributed to heirs, while non-probate property is distributed directly to heirs and bypasses probate altogether. As you will see below, whether a piece of property is probate or non-probate can have a significant impact on the length of time in which an heir will receive the property and the costs involved in carrying out that distribution of property.
Probate property can include all different types of property, including real estate, vehicles, jewelry, antiques, boats, and other items of personal property. If a person dies with a valid will in place, that document will determine which assets are distributed to which heirs. A will also allows the individual to appoint an executor, whose job is to carry out the administration of the estate. However, an executor cannot simply distribute assets according to the will. Rather, the probate court must oversee the estate administration, in order to ensure that creditors are notified, debts are paid, and assets are distributed in accordance with the will. The probate process can be very lengthy and expensive, which makes things more difficult for the heirs; they will receive fewer assets due to the court and attorney expenses involved, and likely will wait much longer to receive their distribution of assets.
Non-probate property, however, does not have to go through probate court proceedings in order to be distributed after a person’s death. These kinds of assets often have a named beneficiary, which determines who receives the asset following the owner’s death. Life insurance policies, IRAs, 401(k) and 403(b) accounts, and other retirement plans are all examples of non-probates for which a person designates a beneficiary. Once that person passes, the beneficiary becomes entitled to the proceeds of the life insurance policy or retirement account without the need for probate. Instead, the transfer of the assets from the now-deceased person to the beneficiary happens quickly and without additional costs.
Another type of non-probate property is the jointly-held property. These are accounts or vehicles that the deceased person co-owned with another person, such as a spouse. A good example of a joint asset is a joint bank account, such as spouses often share. If one spouse passes away, then the other spouse automatically becomes the owner of the account.
If you are unsure as to what sort of estate planning mechanisms best meet your needs, you can turn to Legacy Law Center for legal advice about the different options that are available to you. If you or a loved one needs help with estate planning or related issues, you should definitely contact an experienced Michigan estate planning attorney at Legacy Law Center right away. Call Terrence Bertram at Legacy Law Center today and see what we can offer you and your family.