What assets are not subject to probate?

When creating an estate plan, it's crucial to understand the differences between probate and non-probate assets to ensure your wealth is distributed according to your wishes.

Probate is a legal process that involves getting court approval to distribute a deceased person's estate. Assets that go through probate are governed by your last will and testament, and if you don't have a will, your estate will pass to your heirs according to your state's intestacy laws. Probate assets are typically held solely in your name and don't have a beneficiary designation, such as real estate, vehicles, personal possessions, household items, business interests, and stocks and bonds.

Non-probate assets, on the other hand, pass directly to your heirs outside of any court-supervised probate proceeding, regardless of what's in your will. These assets include IRAs, 401(k)s, annuities, life insurance, joint accounts, accounts with a named beneficiary, assets with a payable on death (POD) or transfer on death (TOD) designation, and assets owned at the time of death by the owner's revocable living trust.

It's essential to name both primary and contingent beneficiaries on your non-probate assets to help avoid probate and ensure your assets pass to the intended recipients. Keep in mind that minor children cannot legally inherit, so it's best to designate a custodian or establish a trust for them.

The executor of your will has several responsibilities, including managing the probate process, gathering information on your assets, filing your tax return, settling your debt, paying your tax bills, and distributing assets to your beneficiaries. Many states have restrictions on who can serve as executor, but generally, they must be 18 years of age or older and of sound mind.

Not understanding the key differences between probate and non-probate assets can lead to unexpected and undesired results when it comes time to distribute your wealth. Planning for the distribution of both types of assets is critical to ensure a smooth estate settlement for your loved ones.

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