What is Probate?
Probate is the court-supervised process of distributing and retitling property after someone dies. The person who has died is called the decedent, and probate involves settling the decedent’s estate.
A probate case begins in the county court. During the case, an inventory of assets is filed with the court; these assets make up the decedent’s estate. Probate is the legal process used to distribute these assets. The estate includes all assets and property subject to probate. Estate administration involves managing the decedent’s estate, paying outstanding debts, and distributing assets according to the law. The process distinguishes between probate assets, which must go through probate, and non-probate assets, which can be transferred outside of probate. Creditors are notified and property is distributed to rightful heirs or those named in a Last Will and Testament (Will). The court process often takes 6-12 months or longer, especially if real property is involved, heirs are difficult to locate, or there are disputes among heirs.
Probate involves court fees, publication fees, executor or administrator fees, and attorney fees. It is governed by state law, so legal requirements can vary. Taxes and outstanding debts must be paid from the estate before assets are distributed to heirs.
Is Probate Necessary?
Probate is generally required when a probate asset is involved—that is, when an asset does not have a designated beneficiary or is not otherwise excluded from probate. Probate is typically necessary in situations such as:
- Property is not held in a Trust
- No beneficiary was named
- Named beneficiary predeceased the owner
- Beneficiary is a minor
- Transfer on Death Deed beneficiaries disagree on property handling
- Heirs dispute ownership
- Heir cannot be found
- Total assets exceed $75,000 in Kansas or $40,000 in Missouri
What are Non-Probate Transfers
A non-probate transfer allows property to pass directly to beneficiaries outside of probate, avoiding the court process. A non-probate asset is any asset that can be transferred this way, such as real property, bank accounts, or retirement accounts. Non-probate assets bypass the probate process, enabling faster and more private distribution to heirs. Beneficiary designation plays a crucial role in ensuring assets pass directly to intended recipients. Planning ahead is essential to make sure your wishes are fulfilled and to minimize complications for your loved ones. Understanding the different types of non-probate transfers helps optimize your estate plan. Each type offers unique benefits, and when properly executed, non-probate transfers efficiently and privately transfer assets like real estate, bank accounts, and other valuable property.
However, non-probate transfers have some limitations:
- They do not assist if you become incapacitated or lose decision-making capacity during your lifetime.
- They do not avoid probate if the named beneficiary has already passed away.
- They only work if a beneficiary is named—any property without a beneficiary will likely require probate.
Examples of Probate Avoidance:
Here are some common examples of non-probate transfers:
Revocable Living Trust:
A Revocable Living Trust owns assets for the benefit of named beneficiaries. Property owned by the trust avoids probate and is considered non-probate assets. This option allows the trustee you name to manage finances if you become incompetent or lack capacity. The trust assists during your lifetime and with asset distribution after your death. For example, transferring a bank account or investment portfolio into the trust enables these assets to pass to your beneficiaries without probate.
Joint Tenancy:
Jointly owned property held as Joint Tenants with Rights of Survivorship means two or more owners each hold an undivided interest in the entire property. Spouses often own real property this way. Upon an owner’s death, the property automatically passes to the surviving owner without probate.
Listed Beneficiary:
A listed beneficiary is a person named on a policy or account to receive funds after your death. Retirement accounts and life insurance policies commonly have listed beneficiaries. Life insurance proceeds typically pay directly to the beneficiary, making these policies non-probate assets.
Payable on Death Designation:
A Payable on Death (POD) designation can be added to accounts such as bank accounts or vehicles. This allows beneficiaries to access funds directly from the account after the owner’s death without probate.
Transfer on Death Deed / Beneficiary Deed:
A Transfer on Death Deed is a deed prepared to transfer real property outside probate. These deeds are filed before death and can be revoked during the owner’s lifetime. They allow real estate to transfer directly to beneficiaries without court involvement.
At your Empowering Estate Education Discussion, we will help you determine the best estate plan strategy for your property and family.
