Probate is the process of administering a decedent’s estate and executing it according to their will or, if there is no will, the applicable state’s intestacy laws. But probate can be extensive and costly. Not to mention assets going through probate can be subject to federal regulations and taxes. This is why some individuals consider nonprobate inheritances when estate planning.
Assets that will go directly to beneficiaries instead of going through the probate process include the following:
- Living trust assets: In a living trust, the grantor assigns a beneficiary, and the trustee must ensure the proper transfer of assets to them.
- Retirement accounts: Retirement accounts like 401(k)s and individual retirement accounts (IRAs) usually have designated beneficiaries, who will automatically receive the savings. But if the account does not have a beneficiary or the beneficiary is no longer available, the account will go to probate.
- Life insurance and transfer on death account proceeds: Like retirement accounts, life insurance and transfer on death accounts already have named beneficiaries.
- Joint tenancy properties: In the case of properties jointly owned by two or more persons, the rules of rights of survivorship will apply. It is good to note that this differs from co-owned properties that are tenants in common because the latter requires probate.
Basically, any asset with a named beneficiary or jointly owned will likely be exempt from the probate process.
The estate’s value also matters
In Arkansas, smaller estates may be exempt from probate. An estate can be considered small if its value is less than $100,000 after payment of debts and liabilities. Aside from the estate amount, other conditions must also be present, such as there is no appointed personal representative or a pending petition for the same and it has been at least 45 days since the estate owner passed.
Individuals must consider possible scenarios when deciding on estate planning tools, such as the probate process. By doing so, they can prepare better and help minimize the stress their family and beneficiaries will go through in case anything happens to them.