When a loved one dies, beneficiaries are often left wondering what they will receive from the estate and when they’ll receive it. It’s a fair question, even in the wake of a close relative’s death. You are entitled to those assets and there’s little doubt that they can help you financially, regardless of your current situation. As a rule of thumb, you should count on all assets in the estate first passing through probate. The executor will need to take an accounting of everything and then the court will contact your loved one’s creditors to ensure that they are paid first. However, there are some assets that don’t pass through probate and ways of subverting the probate process to ensure assets pass directly to heirs. Below, we’ll discuss what assets go through probate and what assets don’t.
Assets That Don’t Need to Pass Through Probate
Assets will only need to go through probate when there are multiple heirs. For instance, if one spouse dies and the couple owned everything (including their home) together, then none of these assets would have to pass through probate before becoming the property of the living spouse. Additionally, living trusts can be set up to distribute assets directly to heirs. These assets would not pass through probate prior to distribution. Other assets include:
- Retirement accounts, 401(k)s, IRAs where a beneficiary was named
- Proceeds from life insurance policies
- Assets held in a living trust
- Funds in a POD (payable on death) bank account or POD bonds
- Securities registered in TOD (transfer on death) form
- Pension plan distributions
- Employment funds (up to a certain amount) owed the deceased
- Real estate held in tenancy by the entierty (homestead property)
Essentially, there are three types of property that do not pass through probate. Those properties registered as payable on death, assets held in a living trust, and property held jointly by a living spouse.
Jointly Owned Real Estate
Assets that are owned jointly by any two parties will pass to the surviving party without having to go through probate. Most often, this involves one spouse leaving their primary residence to a surviving spouse. In Indiana, there are two ways that real estate can be transferred like this:
- Joint tenancy with right of survivorship – The deed names two or more owners and grants a right of survivorship.
- Tenancy by the entirety – If a husband and wife purchase a home together that they reside in, Indiana law establishes them both as owners of the property. If one spouse passes, the other has full rights to the property.
Living Trusts vs. POD/TOD Assets
To avoid probate for an item that is typically processed through probate, an individual would have to fill out a POD/TOD form. That asset would then pass directly to a named heir. To avoid the paperwork associated with doing this for multiple individual assets, living trusts allow trust makers to transfer items such as real estate, valuable collectibles, investments, annuities, and even businesses into the trust. When the trust-maker passes, these assets are then distributed in accord with the trust documents and the trust-maker’s wishes.
Talk to an Indiana Estate Planning Attorney Today
An Indiana estate planning attorney can help you sort out what assets go through probate and which do not. Talk to Barnes Cadwell Law today to learn more.