Many people assume their assets will smoothly transfer to their loved ones when they pass away. However, in reality, a significant portion of your properties may need to go through a legal process called probate before they even reach your beneficiaries.
Probate, the court-supervised process of administering your estate, is often a lengthy and complicated process. This is primarily why legal and financial professionals advise you to structure your estate plan in a way that can avoid this process. To ensure a smooth ownership transfer, understanding which assets typically go through probate is crucial.
Real estate
If you own a house, apartment or land solely in your name, it will likely go through probate. This process will oversee the transfer of the property to the new owner and resolve any disputes or claims against the property. For example, if you are the sole owner of your family home in New York, and you pass away, the court will need to step in to decide who inherits the property, which can lead to delays and disputes.
Bank accounts
If your checking and savings accounts are in your name alone, they will typically go through probate. If you have a joint account or one with a payable-on-death designation, these funds can often avoid probate and transfer directly to your designated beneficiary.
Vehicles
Like other titled assets, like your family home or land, vehicles like your car, motorcycle or boat generally go through probate. However, if you co-own a car with someone else, the ownership may transfer to the surviving owner without probate, depending on how the title is held. For instance, if you own the vehicle under a Joint Tenancy with the Right of Survivorship, the surviving owner will automatically receive the deceased owner’s share upon death.
Investment accounts
Finally, if you have stocks, bonds or mutual funds, they typically go through the probate process. This is unless you have taken the step to name specific beneficiaries for these accounts.
Protecting your wishes early on
While often viewed as a hurdle, probate is necessary to ensure your assets reach those you care about the most, exactly as you intended. However, it is also important to remember that you have the power to shape this distribution. Through estate planning, you can take control of the management of your assets and the legacy you leave behind.
