Whether you’re the executor of a will or creating your own estate plan, understanding the ins and outs of estate administration can feel overwhelming. Often the big question is, “Do I need to go through probate?” In part one of our series, we explained the basics of probate, the legal process, and what kinds of assets need court involvement. This post wraps up our series explaining which property can skip the probate process and also tips for planning your estate.
When Probate Isn’t Needed
In case you missed the first post, probate is simply the court process of settling an estate after someone passes. In Indiana, probate court is not always necessary for certain assets and estates. And as you can imagine, avoiding probate can be worthwhile for saving time, money, and hassle with the administration process. But to qualify, a few guidelines come into play. For example, some kinds of property that can skip probate include:
Assets owned jointly. Sometimes called “joint tenancy,” any property owned with another person does not go through probate. Most commonly, joint ownership includes bank accounts and real estate, but it can also involve any other asset with a joint owner.
Property owned by married couples. Surviving spouses automatically inherit assets without probate. In legalese, it’s called “tenancy by the entirety,” and this usually refers to real estate. For example, if a husband passes away, the wife automatically becomes the sole owner of the home.
Beneficiary accounts. Any investment account with a beneficiary skips the probate process. Beneficiary designations can even trump contradictory wishes in a will. This is why it’s critically important to regularly review and update beneficiaries on your life insurance, IRAs, 401(k)s, pensions, and other retirement accounts.
Transfer-On-Death (TOD) assets. Indiana residents can use a transfer-on-death form to name beneficiaries for vehicles, securities, and real estate to bypass probate. Cars, small boats, stocks, bonds, brokerage accounts, land, and houses all qualify. Fill out the correct form at the BMV for vehicles, contact your financial advisor about securities, or complete a transfer-on-death deed for real estate.
Payable-On-Death bank accounts. Similar to the transfer-on-death assets, bank and credit union accounts can avoid probate and automatically transfer to a new owner with a payable-on-death form. See your financial institution to fill out the proper paperwork.
Small Estates. If an Indiana estate is worth less than $50,000, the family can transfer assets with a simple affidavit (a notarized written statement) and distribute property to heirs without probate. To determine the value of the estate, subtract any debts from the total value of assets. Legal fees and reasonable funeral expenses can also be deducted from the estate’s total.
Living Trusts. A trust is an agreement where you give another person (the trustee) the right to own your property. And a living trust is simply one you create while you’re still alive, even though no one inherits the property until after your death. Since everything in the trust has a beneficiary, the assets can be distributed to heirs without the need for probate.
Regardless of whether you go through probate or not, estate administration can be a complicated and time-consuming process. At BB&C, we live and breathe this type of law. If you’re trying to wrap up a loved one’s will or wondering how best to structure your own estate plan, we can answer all of your questions. Contact Cecelia Neihouser Harper at 765-637-9175.