Some assets may pass on to your heirs without going through the probate court. As reported by U.S. News, properties held in a trust generally do not require a court procedure.
Properties that you co-own with another individual may also not require going through probate. If your deed notes the ownership as “joint tenants with rights of survivorship,” the property passes on to the joint owner upon your death.
How may retirement accounts and transfer-on-death accounts avoid probate?
If you have retirement accounts such as a 401(k) or pension plan, you may add your heirs to the account as your beneficiaries. When you die, the named beneficiaries typically receive the remaining assets held in your accounts. According to the IRS, those distributions may, however, reflect taxable income.
Like retirement packages, you may also name beneficiaries to your financial accounts. Savings, checking and stock brokerage accounts, for example, may allow you to add transfer-on-death beneficiaries. Without requiring probate, your heirs may receive any remaining cash or securities in your accounts by showing proof of your death.
When may a life insurance policy require probate?
Life insurance policies generally do not require probate when a policyholder has living beneficiaries to receive its proceeds. If your beneficiaries predecease you, however, your policy may need updating to avoid probate.
As noted by Business Insider, by not choosing beneficiaries, your life insurance policy may pay your estate when you die. In this case, the policy may go through probate court and might settle your debts and taxes with its proceeds.
Without a sound estate plan, probate administration can become a lengthy process. By naming beneficiaries to your accounts that offer transfer-on-death benefits, you may reduce the time your heirs spend involved with the court to retitle your assets.