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Probate is the legal process of fulfilling a person’s will after their death. If your loved one recently passed away, the topic of probate may be on your mind. Navigating this process can be confusing, especially if you’ve never done it before.
Many people wonder: “Is probate always necessary?” Probate is legally required in the majority of cases, but not all. Learn when probate is required and a few exceptions to be aware of. (While this information is general to the U.S. at large, be sure to check Michigan probate laws or the probate laws in your state for more details.)
Probate Assets vs. Non-Probate Assets
One of the major steps to complete after a person’s death is distributing their assets, or belongings and financial accounts, to their beneficiaries. Probate offers a legal check to ensure that the estate executor or personal representative distributes the assets according to the decedent’s wishes. However, not all assets must go through probate.
Examples of non-probate assets include:
- Life insurance policies with named beneficiaries
- Assets in a living trust
- Bank accounts with transfer-on-death or payable-on-death deeds
- Retirement accounts with named beneficiaries
- Assets with joint ownership and a surviving co-owner
In these cases, the assets can be passed directly to the beneficiary upon the owner’s death. However, in the majority of other cases, assets will need to go through probate before the beneficiary can receive them.
Instance When Probate Is Required
So, when is probate required? You can assume that probate will likely be required for at least some of your loved one’s assets. Specifically, probate is necessary in all of the following cases:
The Decedent Had Probate Assets
Probate assets are those without named beneficiaries tied directly to the account or deed. Just because your loved one designated beneficiaries in their will does not mean these assets can go directly to those individuals after their death. They still need to go through probate first.
Common examples of probate assets include:
- Real estate owned solely by the decedent
- Vehicles owned solely by the decedent
- Bank accounts
- Businesses
- Personal items (artwork, furniture, jewelry, etc.)
Unless these items were held in a trust, they will need to go through probate before they can transfer to beneficiaries.
The Decedent’s Accounts Do Not Have Beneficiary Designations
Retirement accounts and life insurance policies do not automatically pass to the decedent’s spouse or children unless the decedent named them as beneficiaries. Families often encounter this challenge with new accounts or new partners. For example, if the decedent recently remarried and did not change the beneficiary designation on their account, the account may need to go through probate.
The Estate Value Is Over the Minimum for Small Estate Exemptions
Some states have small estate exemptions. In Michigan, if a person’s estate is worth $50,000 or less, it may qualify for a small estate affidavit that allows the family to bypass probate. If you think your loved one’s estate may qualify, you will need to apply for this affidavit and gain approval before you can begin transferring the estate to beneficiaries.
Also, probate may still be necessary in some cases, even if the decedent’s estate meets the small estate exemption threshold. An insurance company or title company may require proof of the decedent’s property ownership, and probate may be necessary to provide this proof.
The Decedent Did Not Place Assets in a Living Trust
If your loved one planned ahead so that your family could avoid probate after their death, they may have transferred their assets into a living trust. If they did not have a living trust in place at the time of their death, this is another instance of when probate is required.
How the Presence of a Will Affects Probate Requirements
Many individuals incorrectly believe that if their loved one had a will, they won’t need to go through probate. In reality, probate administration is necessary in the majority of cases, whether the decedent had a will or not.
If your loved one did have a will, probate is necessary for will validation. The court will verify the will’s legitimacy and ensure that you fulfill your loved one’s wishes as outlined in the will.
If your loved one did not create a will, the court will distribute their property under the laws of intestate succession. This typically means that the court will first distribute the decedent’s assets to their surviving spouse and children and then to other relatives if they had no immediate family members. Probate is still necessary to complete this process.
The smartest way to structure an estate plan to bypass probate is to transfer assets into a living trust. Upon the trust grantor’s death, the trustee would automatically assume control of the assets in the trust, allowing them to distribute those assets to beneficiaries under the trust’s guidelines.
Seek Financial Assistance During Probate From Rockpoint Probate Funding
Probate is often legally necessary to distribute a person’s assets, pay their debts, and close their estate. When probate is required, it can be a lengthy and sometimes expensive process.
If you’re seeking financial relief during probate, Rockpoint Probate Funding can help. We provide cash advances on inheritance funds. You may qualify for an inheritance advance that allows you to receive a portion of your inheritance now, helping you make ends meet while you go through probate.
Contact Rockpoint Probate Funding today at 888-263-8588 for a free evaluation. Then, read our recent blog post to learn the answer to the question, “Do cars go through probate?“
