What to do when probate is only needed for some of the assets while others can be collected right away?

Sometimes, a probate of assets – the court-supervised process of settling an estate – is needed. But, that may not be the case for all assets. This article explains when probate applies and when it doesn’t, and how to handle each asset so things go as smoothly as possible.

Probate 101:

Probate is the process of the court overseeing how a deceased person’s estate is distributed. It takes time, is a more expensive process, and is public information. The court appoints someone to be in charge of the estate (the personal representative/executor) and ensures debts are paid, and distributions are made according to the deceased person’s Will (if one exists) or by law (if there is no Will).

Not all assets need to go through probate.

Learn more about probate.

Assets That Skip the Probate Line

The following are assets that avoid the probate process that will go straight to the beneficiaries (people who inherit):

  • Joint Ownership with Right of Survivorship: When two or more people own property jointly as joint tenants with rights of survivorship, surviving owners automatically inherit the remaining ownership interest. This avoids probate for the deceased’s share.

For example: Husband and wife own real estate together as “joint tenants.” If husband dies, wife owns the property as the sole remaining owner and a probate is avoided. 

  • Transfer-on-Death (TOD) Registrations: Financial institutions, like brokerage firms, where assets such as stocks, bonds, mutual funds, and retirement accounts (IRAs) are held, allow you to name one or more TOD beneficiary(ies). Upon the owner’s death, the assets automatically transfer to the beneficiary, with no probate needed.

For example: Dad has a brokerage account in his own name and designates his three children as TOD beneficiaries on a mutual fund account. Upon person’s death, his children will provide a death certificate, their own identifying information, and complete the brokerage’s claim forms. The brokerage will then distribute 1/3 outright to each beneficiary free of probate.

  • Payable-on-Death (POD) Accounts: This is similar to TOD registrations and relates to bank accounts. A bank account owner can designate a POD beneficiary. Upon the owner’s death, the funds pass directly to the beneficiary, avoiding probate.

For example: Mom has a checking account with a local bank in her name only, naming her one child as the POD beneficiary. Upon her death, the child will provide a death certificate, her contact information, and complete the bank’s form(s). The bank will then distribute the account outright to the child free of probate.

  • Transfer on Death Deeds (TODD): A Transfer on Death Deed acts as a beneficiary designation for real estate. This is a deed you record during your lifetime that does not change the ownership of the property, but it states where the property should go when you die. 

For example: Spouses record a Transfer on Death Deed for their home during their lifetimes stating that when they die, the house will go in equal shares to their nephews. Upon their deaths, the nephews will own the home and will avoid having to go through probate to inherit the property.

  • Trusts: A revocable living trust holds title to assets, with the grantor (the owner) managing the trust during their lifetime. Upon the grantor’s death, the assets transfer directly to the designated beneficiary(s), bypassing probate. Learn more about trusts. 

For example: Mom and Dad created a revocable trust during their lives. The trust included instructions on who they wanted to be in charge (the trustee) and that they wanted their assets to be distributed in equal shares to their adult children at the second of their deaths. Upon Mom and Dad’s deaths, the trustee will collect all assets that are either held in the trust, or have the trust named as a TOD/POD beneficiary. The trustee will pay any bills and administrative costs, and distribute all assets equally to the children following the instructions in the trust. All assets held in the trust or having the trust named as the beneficiary will avoid probate.

Assets That Will Require Probate

Assets that don’t fall into one of the above categories (joint ownership with right of survivorship, TOD/POD designations, and those in a trust) will go through probate. 

Examples are:

  • Real estate owned by one person alone
  • Real estate owned as a tenant in common with someone else – If the deed does not specifically state ownership by two or more people as “joint tenants”, it is held as tenants in common, which means that each owner’s interest is considered as being owned by themself.
  • Individually owned investment, bank, and retirement accounts
  • Personal property 

An Estate with Both Probate and Non-Probate Assets

If an estate has assets requiring and bypassing probate, a two-pronged approach is necessary:

  1. Non-Probate Assets: Beneficiaries can access these assets directly, following the instructions on TOD/POD designations or joint ownership agreements.
  2. Probate Assets: The executor (named in the will or appointed by the court) will file a petition with the probate court in the county where the deceased resided. The court will oversee the process of:
    • Identifying and appraising all probate assets.
    • Paying the deceased’s debts and taxes.
    • Distributing remaining assets to beneficiaries as per the will or state law (if there’s no will).

Affidavit for Collection of Personal Property

Minnesota offers simplified probate options for smaller estates. If the total probate assets value is less than $75,000 (excluding real estate), heirs can collect the assets without formal probate by signing an affidavit and presenting it to the place where the assets are held.

Example: Mom has a bank account in only her name worth $5,000, and a life insurance policy with no beneficiary having a death benefit of $50,000. Because these amounts together are less than $75,000, Mom’s children can complete an affidavit and present it to both the bank and the life insurance company, along with an original death certificate, and the bank and life insurance company will distribute the funds to the children.

Seeking Legal Guidance

Navigating a split estate can be complex, especially if there are disagreements among beneficiaries or the value of the estate approaches the threshold for simplified options. Consulting with Revermann Law is highly recommended.

We can:

  • Help determine which assets require probate.
  • Guide you through the probate process or simplified procedures.
  • Ensure proper debt settlement and tax filings.
  • Offer guidance on resolving any beneficiary disputes.

Understanding probate and how it applies to specific assets in a Minnesota estate is crucial. By identifying assets that can be collected directly and navigating probate efficiently for others, you can streamline the inheritance process and ensure a smoother transition for beneficiaries. Remember, seeking legal advice is always advisable for navigating complex situations and ensuring your loved one’s wishes are met.

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