WHAT IS A PROBATE ESTATE?
The word “Estate” is used to describe the net worth of the decedent when he or she dies. The value of the estate includes all of the assets and all of the liabilities of the decedent on the date of death.
The definition of the decedent’s estate is not the same as the definition of the decedent’s probate estate. The way property is titled will determine where the asset is included as part of the decedent’s probate estate.
Title is the manner in which both real and personal property is owned. Title may be proven by certificate, deed, bill of sale, contract, signature cards or other documents. The title document may also designate a beneficiary.
The title may state an individual owns the property, multiple people own the property, i.e., joint tenants with rights of survivorship, or a trust owns the property.
It turns out title is more than a piece of paper conveying ownership of a house, a car or a safe deposit box. Property title determines whether contract law governs the inheritance of the property or whether the wishes written in your will or trust govern the inheritance of the property.
When someone dies, the estate representative will review the way property is titled. Based upon the method of title, think of the decedent’s estate as going into three buckets: the probate bucket, the trust bucket and the automatic inheritance bucket. Which bucket the asset belongs in is determined by the way the property is titled.
Property placed in the probate bucket comprise the decedent’s probate estate. All of the property represents the decedent’s total estate.
What assets belong in the probate bucket?
What assets belong in the trust bucket?
What assets belong in the automatic inheritance bucket?
Why do the asset buckets matter?
Q. What method of title places property in the probate buck?
A. Probate assets include the following method of title:
- Property owned by an individual
- Property owned as joint tenants with rights of survivorship, no living joint tenant
- Property where “estate” is the designated beneficiary
- Property where “Estate” is the named beneficiary or becomes the default beneficiary because the designated beneficiary died before the owner
- The decedent’s share of property owned as tenants in common
- Community Property with right of survivorship, a living joint tenant.
Q. What method of title places property in the trust bucket?
A. A trust asset is property where the trustee is named as the owner of the property, or the trust is named as a designated beneficiary.
Q. What types of assets belong in the automatic inheritance bucket?
A. Certain types of property have automatic inheritance rights, whereby contract law determines who owns the property. Contract law overrides any instructions contained in a will, a trust, or state intestate succession laws.
- Joint tenants with right of survivorship, a living joint tenant
- Community property with right of survivorship, a living joint tenant
- Property owned by an individual, or more than one person with a designated living beneficiary: life insurance policies, retirement account, pay on death bank accounts, transfer on death brokerage accounts, transfer on death real estate deeds and transfer on death vehicle registration forms.
Q. Why do the buckets matter?
A. Once you know in what bucket the asset belongs , you can understand the size of the probate estate and the size of the total estate.
Probate assets will be managed by the executor named in a will or by a personal representative appointed by the court if there is no will.
- Instructions in the will generally determine the beneficiary of your probate assets. If there is no authentic last will and testament, state intestate succession rules determine the beneficiary of probate property.
- The executor or personal representative must determine the value of the probate estate and whether the probate estate include real estate. The estate representative will the know whether the estate can be settled using small estate procedures or if a normal probate case is required.
Trust assets will be managed by the successor trustee named in your trust. Instructions in your trust determine who are beneficiaries of assets owned by your trust. The trust gives the successor trustee the legal authority to manage trust assets
Assets with automatic inheritance rights will be managed by the beneficiaries who automatically inherit the property. The law automatically determines the beneficiaries and overrides any instructions contained in a will or trust. A beneficiary has the authority to immediately claim their property with a certified death certificate and an affidavit or other claim form.
A bank account or brokerage account titled only in the name of the decedent is a probate asset. But if the decedent completed a payable upon death form for a bank account or a transfer upon death form for a brokerage account, the bank account or brokerage account is not subject to probate.
A life insurance policy that names a beneficiary who is living at the time the decedent dies has automatic inheritance rights is not a probate asset. If the “estate” is the designated beneficiary, the life insurance policy is payable to the decedent’s estate and is a probate asset.
Property owned by a husband and wife as joint tenants with rights of survivorship has automatic inheritance rights and is not a probate asset when the first owner dies.
Real estate titled in the name of the decedent and another person as tenants in common is a probate asset.