When it comes to estate planning, many people think that simple is better and they might be under the assumption that a will is all they need. However, people might be under the impression that wills can avoid problems on death because the will outlines who gets the assets. However, what many people don’t realize is that wills only govern the assets that go through a court proceeding referred to as probate.
There are some assets that are not included in the probate process. This is the distinguishing factor between non-probate assets and probate assets. Your wills govern probate assets but the will does not govern any assets outside of probate. The title to the assets or the way in which you own them determines whether or not probate is required.
A probate proceeding in Massachusetts can include paying off any taxes and debts, appraising the property and distributing any remaining assets along with the will’s provisions. In the event that there is no will, the proceeding is called administration proceeding and state law determines how your property is distributed. Probate assets are those items that are in your name alone when you pass away. If it’s not quite clear who the beneficiary is, the asset will go through the probate process. The court has to first determine that the will is valid in order to do this. Depending on circumstances, the probate process may be costly. Typical charges to the estate are legal fees, court costs and executor commissions. If there is a will contest or heirs can not be found, the cost of probate increases significantly.
Non-probate assets are the result of forms you signed and filed with different companies. First of all, your life insurance policy, bank account, annuity or IRA will have a beneficiary designation – and alternate beneficiary – that you signed and filed with the company. Assets that you own jointly with the right of survivorship mean that when you pass away, the asset transfers directly to the beneficiary you have named. Consult with an experienced Massachusetts estate planning attorney to learn more about the difference between probate and nonprobate assets, and whether nonprobate assets make sense for your planning.