Probate and non-probate assets are two types of assets that you may own when you pass away. It is important to understand the difference between them because it affects how your estate will be distributed and who will inherit your property.
Keep on reading to learn what probate and non-probate assets are, how they are treated under Florida law, and why the difference between them matters.
What are Probate Assets?
Probate assets are assets that are solely owned by you at the time of your death and do not have a designated beneficiary or a joint owner with rights of survivorship. These assets are subject to probate, which is the legal process of verifying the validity of your will, paying your debts, and distributing your property according to your wishes.
Some examples of probate assets are:
- Real estate that is titled in your name only or as a tenant in common with others
- Bank accounts that are in your name only and do not have a payable-on-death (POD) or transfer-on-death (TOD) designation
- Stocks, bonds, mutual funds, and other securities that are registered in your name only and do not have a TOD designation
- Personal property such as furniture, jewelry, art, and collectibles that are not jointly owned or have a beneficiary designation
- Vehicles that are titled in your name only and do not have a TOD designation
- Life insurance policies that name your estate as the beneficiary
- Retirement accounts that name your estate as the beneficiary or do not have a beneficiary designation
What are Non-Probate Assets?
Non-probate assets are assets that are not solely owned by you at the time of your death or have a designated beneficiary or a joint owner with rights of survivorship. These assets are not subject to probate and pass directly to the person or entity you have named or who has the legal right to inherit them.
Some examples of non-probate assets are:
- Real estate that is titled in your name and another person’s name as joint tenants with rights of survivorship or as tenants by the entirety (for married couples)
- Bank accounts that are in your name and another person’s name as joint owners with rights of survivorship or have a POD or TOD designation
- Stocks, bonds, mutual funds, and other securities that are registered in your name and another person’s name as joint owners with rights of survivorship or have a TOD designation
- Personal property that is jointly owned with another person or has a beneficiary designation
- Vehicles that are titled in your name and another person’s name as joint owners with rights of survivorship or have a TOD designation
- Life insurance policies that name a person or entity other than your estate as the beneficiary
- Retirement accounts that name a person or entity other than your estate as the beneficiary
Why Does the Difference Between Probate and Non-Probate Assets Matter?
The difference between these two types of assets matters because it affects how quickly and easily your heirs will receive their inheritance, how much taxes and fees they will have to pay, and how much control you have over who gets what.
Probate can be a lengthy, costly, and extremely public process that involves court supervision, legal fees, filing fees, accounting fees, appraisal fees, bond fees, executor fees, creditor claims, tax returns, and potential challenges from disgruntled relatives or creditors. Depending on the size and complexity of your estate, probate can take anywhere from six months to several years to complete. In other words, it is going to be a while before your heirs get the assets you leave them.
Non-probate assets, on the other hand, can be transferred to your heirs without going through probate. This can save time, money, and privacy for you and your beneficiaries. However, non-probate assets may still be subject to federal estate taxes, state inheritance taxes, income taxes, capital gains taxes, creditor claims, spousal rights, and other legal issues depending on the type of asset and the beneficiary.
Therefore, it is important to plan ahead and coordinate your probate and non-probate assets to ensure that they are distributed according to your wishes and minimize the tax burden and legal hassle for your heirs.
How do you do that? You do not. You hire an expert to do it for you.
How We Can Help
We can help you draft a valid will that expresses your intentions, and we can help you use various tools such as trusts, joint ownerships, beneficiary designations, TOD deeds, POD accounts, gift transfers, life insurance policies, retirement accounts, and more to avoid probate for some of your assets.
In addition, we can help you update your plan as your life circumstances change and help you administer your estate after your death, whether it involves probate or not.
We are committed to providing you with personalized and professional legal services. We are here to answer your questions, address your concerns, protect your interests, and help you leave a lasting legacy for your loved ones. Ready to get started? You can call us at (305) 921-0976, email us at [email protected], or send us a message on WhatsApp at +1 (305) 921-0976.