Probate Assets vs. Non-Probate Assets

When you’re engaging in estate planning, understanding the difference between probate and non-probate assets is essential. During the probate process, a Massachusetts court oversees the distribution of your property after you pass away. A person’s Last Will & Testament only controls the distribution of probate assets. Non-probate assets pass directly to the beneficiary outside the probate process. 

At Surprenant & Beneski, PC, we can help you understand how a probate court will categorize your assets during the probate process. We’ll listen to your goals and develop an estate plan that meets your needs and allows your beneficiaries to keep as much of your assets as possible. 

The Probate Process

The probate process involves determining whether a person’s Last Will & Testament is valid and administering a decedent’s estate. During the probate process, an estate executor (also known as a Personal Representative) will supervise the process. First, the probate court will decide if the decedent’s will is valid. If the will is valid, the court will enter it into probate and begin the probate process. 

Estate executors pay any debts owed by the estate and conduct accounting and inventory of the assets owned by the estate. The estate executor will distribute any remaining assets to the beneficiaries of the estate after paying the taxes on the estate as well as the creditors.

The duration of the probate process in Massachusetts depends on the size, complexity, and number of assets owned by the estate. Typically, the probate process takes anywhere between 9 and 18 months. 

Probate Assets in Massachusetts

Probate assets include any assets that will pass to the beneficiaries through the decedent’s will. When the decedent doesn’t have a will, probate assets will pass to his or her heirs under Massachusetts intestacy laws. Probate assets include the following:

  • Real property owned only by the decedent
  • An interest in real property that the decedent owned as a tenant in common
  • Life insurance policies that name the decedent as the beneficiary
  • Life insurance policies that name the decedent’s estate as the beneficiary
  • Personal property, including furniture, collector items, and furniture 
  • Bank accounts owned solely by the decedent
  • Automobiles and boats owned exclusively by the decedent
  • An interest in a corporation, partnership, or LLC in the decedent’s name
  • A brokerage account that lists the decedent or his estate as the beneficiary
  • Intellectual property owned solely in the decedent’s name

Non-Probate Assets in Massachusetts

Non-probate assets don’t require the court to transfer the ownership title to the beneficiary; they are not subject to the probate court. In other words, they pass to the beneficiaries outside of any court process. Beneficiaries inherit non-probate assets directly, based on a beneficiary designation, or the form of a title. Non-probate assets often include:

  • Real estate held with another person in joint tenancy with rights of survivorship
  • Bank accounts or brokerage accounts held jointly or payable on death (POD)
  • Bank accounts jointly with a transfer on death (TOD) designation
  • Automobiles or boats held jointly with another person with rights of survivorship
  • Any other property owned in a joint tenancy with rights of survivorship
  • Life insurance policies that do not name the decedent as the beneficiary
  • Brokerage accounts that do not name the decedent as the beneficiary
  • Retirement accounts that name a beneficiary other than the decedent
  • Property owned by a trust 

When the decedent left no real estate and the value of his or her real estate is valued at $25,000 or less, the estate is considered a “voluntary administration.” During this process, any person who has an interest in the estate can act as a voluntary personal representative. 

What Happens to Non-Probate Assets?

Your will does not dictate or control what happens to your non-probate assets. You will need to identify your non-probate assets and coordinate their distribution through the provisions of your will. Thankfully, non-probate assets transfer outside of the probate court, helping your beneficiaries save the time and money associated with the probate process. 

The Benefits of Leaving Non-Probate Assets to Beneficiaries

Your loved ones can have access to your non-probate assets immediately after your death. Avoiding probate can be particularly helpful for surviving spouses who need access to cash as quickly as possible after your death to pay expenses, sell a property, or pay medical expenses. Additionally, some types of non-probate assets will be protected from your creditors. 

Avoiding Probate Does Not Always Mean Avoiding Taxes

Keep in mind that your probate estate is not the same as your taxable estate. The Internal Revenue Service (IRS) uses its own set of regulations and policies to determine the amount of taxes you or your estate must pay. Whether your property needs to pass through the probate process or not does have a bearing on whether it will be considered part of your taxable estate.

For example, you may own a life insurance policy that names your adult child as a beneficiary. The proceeds from the life insurance policy will pass to your child outside of the probate process. Nonetheless, the total amount of the life insurance policy will be part of your taxable estate, unless an irrevocable life insurance trust owns the policy. 

As you consider which assets are probate vs. non-probate, keep in mind that avoiding the probate process doesn’t necessarily mean you can avoid probate fees and taxes. At Surprenant & Beneski, PC, we can help you create a strategy to decrease your estate’s total tax liability. 

Contact Our Experienced Probate Lawyers Today

It is important to take the time to understand whether your property is probate or non-probate property. By rightly categorizing your assets, you’ll be able to take the appropriate steps to accomplish your goals for the transfer of your property. At Surprenant & Beneski, PC, we can help you make strategic decisions about how to categorize your assets as part of a thorough will or trust-based estate plan. Contact our Southeastern Massachusetts probate lawyers today to schedule your initial consultation.