When you pass away, not all property goes through the probate process. Some assets transfer directly to beneficiaries and avoid probate.
If you are starting or updating your estate plan, it is important to understand the difference between probate and non-probate assets.
Probate assets
Probate assets are assets that must go through the probate process to legally transfer to the heir. This is generally true whether you have a will that names the heirs you would like to receive your assets or whether you pass away without a will.
Common examples of property subject to the probate process include real property, such as a home, personal property, motor vehicles, bank accounts, investment accounts, stocks, bonds or business interests.
Probate in Ohio
The probate process is managed by your estate executor. This is a person you appoint to handle your estate administration. If you do not have a will, an executor is appointed by the court.
The executor will start the probate process by filing a petition with the court, along with a copy of your will and death certificate. They will then give notice to everyone involved and perform an inventory of your assets.
After inventorying your assets, they will pay any outstanding debts and distribute the remaining assets to the heirs named in your will. The final step is asking the court to close the probate estate.
Non-probate assets
Not all assets go through probate before being distributed. Jointly owned assets, assets held in a trust or assets with a previously named beneficiary can avoid the probate process.
Common examples of non-probate assets include annuities, retirement plans, pensions and any other accounts with a payable on death or transfer on death designation.
Jointly held assets or assets with a right of survivorship will not go through probate. This is typically the case with a home or other real estate jointly owned by spouses. If you pass away jointly owning real estate with your spouse, your spouse will automatically receive the real estate. It will not become part of the probate estate.
If you have assets that allow you to name a beneficiary but you would rather have the proceeds distributed to heirs according to Ohio probate laws, you can name your probate estate as the beneficiary. When you pass away, the proceeds from the assets, such as a retirement plan, are distributed to your heirs according to probate law.
Strategies to avoid probate
Avoiding probate altogether is a goal for many people. If this is your goal, jointly titling assets, naming beneficiaries and placing assets in trust can help shield assets from probate.
Sometimes people choose to set up a trust as a strategy to avoid probate. There are various types of trusts, including revocable and irrevocable trusts, which allow your assets to go to beneficiaries without having to go through probate.
Understanding the laws related to probate and non-probate assets is extremely important. Your estate plan should be designed to cover and protect all assets and accomplish your goals for distribution to heirs.