Christene (Chris) Krupa Downs
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Maximizing Inheritance: Optimizing Probate and Non-Probate Assets

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Christene “Chris” Krupa Downs
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Part of the estate planning process includes reviewing which assets must go through probate to pass to your beneficiaries and which assets are considered “non-probate,” of those that don’t necessarily have to be covered by a will.

Certain assets may pass directly to a designated individual, but having the right beneficiary designation on any accounts you wish to go to your spouse or children is crucial. An Estate Planning Attorney can help you structure your assets and ensure the right beneficiary designations are in place.

Probate Assets

A probate asset is governed by the terms of the deceased’s will. It passes through probate and may be subject to creditor claims, or in other words, an asset without a survivorship arrangement or a beneficiary designation.

Non-Probate Assets

Non-probate assets disposition may happen in one of two ways:

  • Correctly titling the assets so that the title passes to the appropriate person. For example, a husband and wife having their joint check account set up as a “joint tenant with right of survivorship.”
  • Designate a beneficiary in the documents that control the asset

What are Non-Probate Assets?

  • Bank Accounts. Checking and savings accounts may be non-probate if you name a beneficiary to select a right of survivorship option on the account. 
  • Pay-on-Death Account. You can establish an account as a pay-on-death account, in which you can name one or more beneficiaries to receive the account upon your death, although you retain full ownership rights of the account while you’re alive.
  • Multi-Party Account. You can establish an account held by more than one person, allowing for both co-ownership or a survivorship agreement.
  • Investment Accounts. If you own an investment or securities account, you may designate a beneficiary through the account’s financial institution.
  • Retirement Accounts. These include IRAs, 401(k), 403(b) accounts, and pension plans. Tax may be assessed on distributions from these accounts, but you can establish a beneficiary who may benefit from certain preferred tax benefits.
  • Life Insurance Policies. Life insurance policies pay death benefits to a person or persons listed as beneficiaries, although in some cases, death benefits may be subject to formal estate administration. You can also set unequal shares for life insurance beneficiaries, such as 2/3 to a spouse and the remaining 1/3 distributed to your children.
  • Transferring Life Insurance Policies. You can also transfer ownership of a life in surface policy. Although “incidents of ownership” may transfer along with the policy. The new owner can exchange the policy, take a loan against it, or even surrender the policy entirely.
  • Annuity Contracts. Annuities may be transferred in much the same manner as life insurance policies or can be structured to have a transfer of ownership upon the death of the initial account holder.
  • Real Estate. Real estate can be a non-probate asset through the use of a Transfer on Death Deed, a Ladybird Deed, or even a deed that creates a right of survivorship. Absent these, the real estate goes through probate.

If you have any questions regarding probate and non-probate assets get in touch with a Texas estate planning  lawyer to learn more.

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