Determining when an estate has to go through probate is an essential aspect of estate planning. Probate is the legal process by which a deceased person’s assets are distributed to their beneficiaries or heirs and any outstanding debts (to creditors for example) or taxes are settled. The process of determining whether an estate must go through probate is influenced by various factors.
One of the primary factors that influence the probate process is the type and ownership of assets. In general, assets that are solely owned by the deceased person will likely have to go through probate. This includes assets such as real estate, bank accounts, and vehicles.
However, assets that have designated beneficiaries, such as life insurance policies or retirement accounts, typically pass outside of probate directly to the specified beneficiaries.
The value of the estate also plays a role in determining the probate requirement. In New York, for example, if the estate’s value exceeds a certain amount, probate may be necessary. However, there are exceptions for smaller estates, which could qualify for simplified probate procedures or even avoid probate entirely. These exceptions often apply to estates below a specific threshold, typically around $150,000.
How the Estate Value Affects Probate
The estate value is a determining factor in the probate process, which is the legal process of administering a deceased person’s estate. In most states, there is a minimum value threshold for probate, meaning that estates below this threshold are exempt from going through the probate process.
The minimum value threshold varies across states and counties but is typically around $50,000.
For smaller estates that fall below the minimum value threshold, special rules may apply to expedite the probate process. These rules are often referred to as “simplified probate” or “small estate administration.” Simplified probate allows for a quicker and less costly administration of the estate. States may have specific procedures and requirements for small estate administration, such as an affidavit or a simplified form that enables the transfer of assets without the need for a formal probate proceeding.
Only certain types of assets are subject to probate. Generally, assets that are solely owned by the deceased and do not have a designated beneficiary or transfer-on-death (TOD) designation are subject to probate. These assets include real estate, bank accounts, investment accounts, vehicles, and personal belongings. However, assets that have joint ownership, beneficiary designations, or TOD designations, such as life insurance policies, retirement accounts, and payable-on-death (POD) bank accounts, bypass probate and are directly transferred to the designated beneficiaries.
It’s Possible to Avoid Probate Court Entirely
It is possible to avoid probate court entirely through various methods, such as utilizing trusts and joint ownership with the right of survivorship. By understanding these methods, individuals can effectively plan their estates and provide a smoother transition for their beneficiaries.
One common way to avoid probate is by holding assets in a trust. A trust allows individuals to transfer their assets to a separate legal entity, managed by a trustee, who will distribute the assets to designated beneficiaries according to the terms of the trust. Since the assets are held outside of the individual’s estate, they do not have to go through probate.
Another method is utilizing joint ownership with the right of survivorship. This means that when one joint owner dies, the ownership of the property automatically transfers to the surviving joint owner, bypassing probate. This method is commonly used for real estate, bank accounts, and other estate assets held jointly.
Avoiding probate offers several benefits, including avoiding expensive fees and lengthy delays. Probate costs can get expensive – the courts, probate attorney legal fees, and executor fees can quickly add up. Additionally, the probate process can be time-consuming, often taking several months or even years to resolve. By bypassing probate, beneficiaries can receive their inheritance more quickly and with fewer expenses.
It is important to note that estate planning and probate laws vary by state. Some states, such as California, are community property states. In these states, property acquired during a marriage is considered community property and generally requires probate upon the death of one spouse. However, proper estate planning can still help minimize the impact of probate in these states.
Determining the Threshold for Probate
Determining the threshold for probate is essential to ascertain whether an estate exceeds the minimum value required for the probate process to be initiated. Several factors come into play when determining this threshold, including state laws and the nature of assets.
State laws play a crucial role in establishing the threshold for probate. Each state sets its own limit, and it is important to consult the specific laws of the jurisdiction where the deceased resided. These laws outline the minimum value of an estate that triggers the probate process. In general, if the estate’s value falls below this threshold, it may be exempt from probate.
Minimum Estate Values by State
Minimum Estate Values by State refers to the various thresholds set by states in the United States, which determine whether an individual’s estate is subject to probate or not. These thresholds, also known as small estate limits or small estate affidavit limits, are the maximum values a deceased person’s estate can have for their heirs to bypass the probate process. Each state has its own specific minimum estate value, which varies widely across the country.
Below is a chart to reference your state’s minimum threshold for probate.
| State | Probate Threshold (typically to avoid official probate process) |
|---|---|
| Alabama | Estate doesn’t have any real estate and the value doesn’t exceed $25,000 |
| Alaska | The value of an estate is $50k or less after liens, encumbrances, and the value of vehicles are subtracted |
| Arizona | Two requirements to avoid probate in Arizona: 1. Personal property is less than $75k 2. Real estate value is less than $100k |
| Arkansas | Two requirements to avoid probate in Arkansas: 1. Value of the estate is less thank $100k 2. All debts and judgements against the estate are paid |
| California | The value of an estate is less than $184,500 |
| Colorado | The value of an estate is less than $74k |
| Connecticut | The value of an estate is less than $40k |
| Delaware | The value of an estate is less than $30k |
| Florida | The value of an estate is less than $75k |
| Georgia | Georgia doesn’t have a minimum threshold for probate, but does have an exception when funds in a bank account are less than $15k |
| Hawaii | In Hawaii, “small summary probate” kicks in when the state value is less than $100k |
| Idaho | The value of an estate is less than $100k |
| Illinois | In Illinois, “small estate affadvits” kicks in when the state value is less than $100k |
| Indiana | In Indiana, there are alternatives to the probate process when the estate value is less than $50k |
| Iowa | The value of an estate is less than $50k |
| Kansas | The value of an estate is less than $25k and only contains personal property |
| Kentucky | The value of an estate is less than $15k and only persons inheriting from the estate are spouse or children |
| Louisiana | The value of an estate is less than $125k |
| Maine | If the value of the estate doesn’t exceed the homestead allowance or estate is worth less than $20k |
| Maryland | The value of an estate is less than $50k |
| Massachusetts | The value of an estate is less than $25k and doesn’t contain real property |
| Michigan | The value of an estate is less than $15k after funeral costs are paid |
| Minnesota | The value of an estate is less than $75k |
| Mississippi | The value of an estate is less than $12,500k with no bank account or will |
| Missouri | The value of an estate is less than $15k |
| Montana | The value of an estate is less than $50k qualify for informal probate |
| Nebraska | The value of an estate is less than $50k |
| Nevada | The value of an estate is less than $20k or if there is real property |
| New Hampshire | None |
| New Jersey | If value of an estate is less than $10k with a will and $20k without a will |
| New Mexico | The value of an estate is less than $50k under certain circumstances |
| New York | The value of an estate is less than $50k |
| North Carolina | The value of an estate is less than $20k |
| North Dakota | The value of an estate is less than $50k |
| Ohio | The value of an estate is less than $35k |
| Oklahoma | The value of an estate is less than $50k |
| Oregon | The value of an estate has less than $275k worth in total value, less than $200k in real estate and less than $75k worth in personal property |
| Pennsylvania | The value of an estate is less than $50k |
| Rhode Island | The value of an estate is less than $15k |
| South Carolina | The value of an estate is less than $25k and doesn’t contain real property |
| South Dakota | The value of an estate is less than $50k |
| Tennessee | The value of an estate is less than $50k not including real estate |
| Texas | The value of an estate is less than $75k, not including exempt property |
| Utah | A small estate affidavit may be used if: – The entire value of the estate is under $100,000, -There is no real property, -At least 30 days have passed since the death, and -No application for appointment of personal representative has been filed |
| Vermont | The value of an estate is less than $45k and there is no real estate besides timeshare |
| Virginia | The value of an estate is less than $50k and there is a successor in interest |
| Washington | The value of an estate is less than $100k |
| West Virginia | The value of an estate is less than $50k |
| Wisconsin | The value of an estate is less than $50k |
| Wyoming | The value of an estate is less than $200k, less liens and encumbrances |
What Types of Assets, Including Money, are Subject To Probate?
In the following sections, we will explore the various categories of assets that typically undergo probate, providing insight into what individuals should consider when organizing their estate plans.
Jointly Owned Assets
Jointly owned assets can be subject to probate or not, depending on the type of joint ownership. When individuals co-own an asset, such as real estate or a bank account, it is essential to understand the different types of joint ownership arrangements to determine their status in the probate process.
One common type of joint ownership is joint tenancy with rights of survivorship. In this arrangement, when one owner passes away, the asset automatically transfers to the surviving owner(s) without going through probate. This means that joint tenancy assets are not subject to probate.
On the other hand, another form of joint ownership is tenancy in common. With this arrangement, each owner holds a distinct share of the property, which can be passed on to heirs through a will or probate when an owner dies. Consequently, assets held as tenancy in common are subject to probate.
Beneficiary Designations
Beneficiary designations determine how certain assets will be distributed after the owner’s death. One of the main advantages of beneficiary designations is that they bypass the probate process.
However, there are exceptions to beneficiary designations. If the named beneficiary predeceases the owner or becomes incapacitated, the assets may not be dispersed according to the owner’s wishes. In such cases, the assets might be subject to probate and distributed according to state laws or the terms of the owner’s will.
Examples of non-will assets that commonly have beneficiary designations include life insurance policies, pension benefits, retirement accounts like IRAs or 401(k)s, and payable-on-death bank accounts. These assets allow the account owner to specify who will receive the proceeds upon their death. By naming beneficiaries, individuals have more control over the distribution of their assets and can ensure that their loved ones are provided for.
Trust Assets
Trust assets are not subject to probate. Probate is the legal process by which assets are distributed after an individual’s death. However, trust assets, held within a trust, bypass the probate process entirely.
Trust assets refer to any personal property or belongings that have been transferred into a trust. A trust is a legal arrangement in which a person, known as the grantor or settlor, transfers their assets to a trustee to manage for the benefit of another person or group of people, known as the beneficiaries. Trusts are commonly used in estate planning as they allow for the efficient transfer of assets, while also providing flexibility and control over how those assets are managed and distributed.
The distinction between probate and non-probate assets is important to understand. Probate assets are those that are subject to the probate process, meaning they must go through the court system for distribution. Non-probate assets, on the other hand, are those that transfer directly to a designated beneficiary outside of probate. This includes assets held in a trust, as well as assets with designated beneficiaries such as life insurance policies or retirement accounts.
Updating a living trust regularly is crucial to ensure that it remains current and aligned with the grantor’s wishes and goals. By updating the trust, the grantor can add or remove assets, change beneficiaries, or make any necessary adjustments. This helps to avoid any potential complications or disputes that may arise if the trust is outdated or no longer reflects the grantor’s intentions. Regular updates to a living trust by an estate planning attorney provide peace of mind before a loved one passes, instead of dealing with it at the time of death.