Probate is the legal process of executing a decedent’s will, settling their debts, distributing their individually-owned assets, and closing their estate. Not all assets are required to transfer ownership through probate, and there are plenty of situations where probate is unnecessary. Following is a brief discussion of when probate is necessary and what types of assets are subject to probate.
Did the decedent have any valuable personal possessions?
It’s not uncommon for people to pass away without any valuable assets (bank accounts, brokerage accounts, real estate), but most people have at least a few personal possessions when they die—clothing, furniture, electronics, sentimental items, etc. These may not be intrinsically valuable, but they’re still considered assets.
Technically you can’t sell, gift, or transfer any of the decedent’s individually-owned assets (including personal possessions) until probate is open. If you have an estate sale or dispose of items through private transactions, you would need to deposit the proceeds of those transactions into an estate bank account. The funds in that bank account would be used to pay the decedent’s outstanding debts and taxes, and any remaining value would ultimately transfer to the decedent’s heirs.
However, while that’s the law it generally isn’t common practice. Most probate judges, attorneys, and creditors don’t care about furniture, clothing, and nominal belongings. Generally speaking, if the transaction costs, legal fees, and court costs amount to more than the fair market value of the personal possessions, it doesn’t make sense to probate the estate. Where you might run into trouble is when the decedent left valuable personal possessions like jewelry, art, collectibles, or guns. If these items have a substantial fair market value, you may be required to probate the estate. If you find yourself in this situation, it’s best to consult with a probate attorney to weigh your options and assess your obligations.
Is the estate insolvent?
An estate is insolent when there are more liabilities (debts, taxes, bills) than assets. If the decedent didn’t leave any valuable assets to pay their liabilities, probating an insolvent estate likely isn’t necessary. However, if there are any individual assets of value—including personal possessions like jewelry, art, and collectibles—the estate’s creditors have a legal claim on those assets and probate is required.
Does the decedent have any sizeable debts or judgements against their estate?
If the decedent has any substantial debts or court judgements against their estate, it may be a wise move to probate and close the estate even if there aren’t any valuable assets. The reason for that is the statute of limitations for claims on an estate varies depending on whether or not an estate has been closed. If an estate is never probated and closed, creditors have up to two years to submit a claim on the estate, and they may be able to petition to open probate on their own. There may not be any assets for them to actually claim, but it can still be a headache to deal with. Once the estate is closed by a probate judge, however, all distributions and payments are binding and conclusive, and the window for creditors to seek repayment or open probate closes.
Did the decedent leave a will?
If the decedent left a will, you are obligated to file their will with the county probate court within 30 days of their death (some states allow up to 120 days, but 30 days is always the safe bet to avoid any personal liability). Most people petition to open probate when they submit the will to the court, but probate isn’t necessary if the decedent doesn’t have any valuable assets that would need to transfer through probate court.
If the decedent didn’t leave a will, probate is still only necessary if there are individually-titled assets that need to be transferred through probate court. If there are any assets that require probate court, the decedent’s estate is considered “intestate” and their assets will be distributed according to the state’s intestate succession laws.
The small estate exception
Estates with less than $75,000 in personal property and less than $100,000 in real property are allowed to transfer assets to beneficiaries and heirs without going through probate. If there is personal property to transfer, you’ll need to wait 30 days; if there is real estate that needs to transfer, you’ll have to wait at least six months. When the time limit is satisfied, you can submit a simple affidavit to the county probate court listing the decedent’s assets and who has the legal right to receive those assets. If the decedent left a will, that document will dictate the transfer; if there is no will, the assets can be claimed by heirs according to the state’s intestacy laws.
If probate is necessary, which assets need to transfer through probate court?
When probate is required, only the decedent’s individually-owned assets need to transfer through probate court. Assets that are typically subject to probate include:
- Bank and brokerage accounts in the decedent’s name
- Real estate owned individually or as tenants in common
- Cars, trucks, and recreational vehicles
- Personal possessions such as jewelry, art, and collectibles
The reason these assets require probate is because each of them is titled in the decedent’s name, and only a probate judge has the authorization to order a transfer of title. Without probate, individually-owned assets become frozen upon the owner’s death and cannot legally transfer to a new owner, even if the beneficiary is named in the decedent’s will.
Which assets can bypass probate?
Assets that have a designated beneficiary listed on the account are designed to transfer ownership automatically when the owner dies. All the designated beneficiary needs to do is present a copy of the owner’s death certificate to the financial institution holding the assets, and the financial institution will usually transfer the assets within 1 – 2 weeks. Because these assets aren’t subject to probate, they are outside the reach of creditors and can pass to the beneficiaries regardless of whether or not the estate is insolvent. Assets that have the potential to bypass probate include:
- Bank and brokerage accounts with a payable-on-death or transfer-on-death beneficiary
- Real estate owned as joint tenants or as tenants in the entirety
- Retirement accounts (401k, IRA, etc.)
- Life insurance policies