When a person passes away, a question arises as to what happens to the assets that were owned by the decedent? Ideally, an estate plan has been put in place before death, so that the decedent’s wishes will be honored regarding the future of those assets. An effective estate plan recognizes the difference between probate and non-probate assets, which will streamline the process and reduce potential complications.
Probate assets are those that must go through the probate process in order to be distributed to heirs or beneficiaries. This legal process involves proving the validity of a Will, settling outstanding debts, and distributing assets according to the deceased person’s wishes or, in the absence of a will, according to Pennsylvania’s intestate succession laws.
Any assets solely owned by the deceased person typically go through probate. This includes real estate, bank accounts, vehicles, and personal property that were not held jointly with another person or designated with a beneficiary.
Simply put, in probate, the deceased person’s assets are collected and accounted-for, debts and taxes are paid, property is distributed to beneficiaries, and the estate is settled. Our top probate lawyers begin the process by filing a petition with the Register of Wills in the Pennsylvania county where the deceased person resided at the time of death.
Non-probate assets are things that do not need to go through a special legal process when someone passes away. These are assets that are set-up in a way that they automatically go to the people who are supposed to get them, without going through the probate process. Here are some common examples:
Jointly Owned Property: If someone owns something like a bank account or a house with someone else, and they both have rights to it when one of them passes away, the other person automatically gets the whole thing.
Retirement Accounts: Money saved in retirement accounts, like 401(k)s and IRAs, usually has a specific person named to get it when the owner dies. It goes directly to that person without needing probate.
Life Insurance Policies: When someone has a life insurance policy, they choose who should get the money when they die. That money goes directly to the chosen person without going through probate.
Payable-on-Death (POD) Accounts: Some bank accounts or investments let you name someone who will get the money when you pass away. It goes straight to that person without probate.
Trust Assets: If someone puts their things in a special legal arrangement called a trust, those things do not have to go through probate. They are managed and given out according to the rules of the trust, which can keep things private and might have tax benefits.
These non-probate assets help make sure that the right people get what they are supposed to have when someone passes away, and they can avoid the sometimes slow and expensive probate process.
Remember, Non-probate does not mean non-taxable. There is a false belief that all non-probate property is non-taxable. This is not true. Even if the property is received due to joint titling or as a trust beneficiary, it still may be subject to Pennsylvania Inheritance Tax. One way to help your loved ones avoid a lot of these problems is to work with a knowledgeable estate planning attorney when creating a will and estate plan.