If you’re planning your estate or handling a loved one’s affairs after their passing, you’ve likely heard about “non-probate assets.” Understanding these types of assets and how to incorporate them into your estate plan is crucial because they bypass the probate process entirely, making the estate distribution quicker, simpler, and often less costly. But what exactly are non-probate assets in Tennessee? Here’s everything you need to know:
What Are Non-Probate Assets?
Non-probate assets are those that do not require court supervision to transfer to the beneficiaries. These assets have a designated beneficiary or legal structure that dictates who inherits them, regardless of what is stated in the will. Probate assets, on the other hand, are required to pass through the probate court and are distributed according to the terms of the will (or according to state intestacy laws if no will exists).
Common Types of Non-Probate Assets in Tennessee
Here are some of the most common types of non-probate assets in the state of Tennessee:
Jointly Owned Property (With Right of Survivorship)
Property held jointly with rights of survivorship automatically passes to the surviving owner(s) when one owner dies. This is common in real estate, bank accounts, and certain investment accounts, especially for married couples. For example, if a married couple owns their home as “joint tenants with right of survivorship,” the surviving spouse becomes the sole owner without needing probate.
Beneficiary-Designated Accounts
Accounts like life insurance policies, retirement accounts (IRAs, 401(k)s), and annuities often have beneficiary designations. The assets in these accounts go directly to the named beneficiaries upon death. Beneficiary designations override the terms of your will, so it’s important to keep them up to date; failing to do so could result in unintended consequences.
Payable on Death (POD) and Transfer on Death (TOD) Accounts
Bank accounts (POD) and investment accounts (TOD) can be set up to transfer directly to a named beneficiary upon the account holder’s death. This designation allows the funds to pass outside of probate. For example, if you have a checking account with a POD designation to your child, the funds transfer directly to them without involving the probate court.
Trust Assets
Assets held in a trust, such as a revocable living trust, are not required to pass through probate because the trust itself owns the assets, not the individual. Upon death, the successor trustee distributes the assets according to the trust’s terms, without the need for probate.
Trusts can be a powerful tool for estate planning, especially for those seeking privacy and efficiency in asset distribution. This is why, at The Ebbert Law Firm, we recommend setting up a trust-based estate plan as the preferred option for our clients.
Small Estates in Tennessee
Tennessee has a simplified probate process for small estates under $50,000. While technically not non-probate, this expedited process can sometimes feel like a non-probate transfer due to its speed and simplicity.
Potential Pitfalls to Avoid
Non-probate assets can make the administration of an estate much easier for your loved ones, as they allow beneficiaries to access funds or property more quickly and avoid the costs and delays of probate. However, careful planning is crucial to ensure that your non-probate assets align with your overall estate plan. If not properly coordinated, they can lead to unintended results or even disputes among heirs. Here are some potential pitfalls to keep in mind as you plan your estate:
Outdated Beneficiary Designations
Life changes such as marriage, divorce, or the birth of children should prompt a review of your beneficiary designations. Failure to keep these designations up-to-date can result in assets passing to an ex-spouse or unintentionally disinheriting a child.
Conflicts with the Will
Remember, non-probate asset designations take precedence over the will. If your will says one thing and the beneficiary designation says another, the designation wins. This can lead to family conflict or unintended disinheritance.
Not Having a Contingent Beneficiary
Always name a backup beneficiary in case the primary one predeceases you. Without a valid beneficiary, the asset could end up back in probate.
Plan For the Future With The Ebbert Law Firm Today
Non-probate assets are a valuable part of any comprehensive estate plan. By understanding how these assets work and incorporating them wisely, you can streamline the process for your beneficiaries and keep more of your wealth intact.
For help incorporating non-probate assets into your estate plan, consider working with an experienced estate planning attorney at The Ebbert Law Firm. We’ll ensure that your assets are properly titled, your beneficiary designations are current, and your wishes are clearly documented. This proactive planning can save your loved ones time, stress, and money. Contact us today!