A lot of people who create an estate plan are concerned about the probate process, and craft plans to try to focus on non-probate assets. But what are non-probate assets? For that matter, why is probate such big deal? Why should your estate plan try to use non-probate assets to help you achieve your goals?
Even though we covered the basic probate process in a previous post in this series on understanding estate planning in Oklahoma and Kansas, we thought we would take a little time to further discuss the essential issue of non-probate assets, and how your estate plan uses them.
As you probably already know, the probate process is the legal process that takes place after someone dies leaving behind property. That property cannot just simply sit around forever, and new owners have to take possession of it. The probate process is designed to identify those new owners and transfer the left behind property to them in a uniform, fair, and impartial manner.
Unfortunately, probate assets can take months, or even years, to properly transfer from the deceased person’s estate to the new owners. Because of this, estate plans that focus on non-probate assets are often viewed as superior to plans that don’t focus on them because it allows for more easy and efficient transfers of property from the deceased to the new inheritors.
A non-probate asset is anything that will transfer outside of the probate process. State laws determine what probate and non-probate assets are, so determining exactly what can pass outside of probate is a question that you need to bring up your attorney. Some assets, for example, automatically pass outside probate. These types of automatic non-probate assets include life insurance policies that allow you to name a beneficiary, transfer-on-death assets or financial accounts, as well as jointly owned property with rights of survivorship.
Transforming Probate Assets Into Non-Probate Assets
It’s also important to understand that even if you own assets that don’t automatically transfer outside of the probate process, you can take these probate assets and transform them into non-probate assets by taking the proper steps. The most common way to do this is to create a revocable living trust, also known as an inter vivos trust. Once you create the trust and transfer your probate assets into the trust’s name, those assets can then effectively pass outside of the probate process because the trust is the new owner and continues to own the property even after you die.
If you would like more information about how this transformation of probate into non-probate assets works, you should talk to us for more details.
Parman & Easterday