Beyond The Will, Client Compass

What Are Probate Assets and Why Should I Minimize Them?

November 13, 2019


As discussed previously, when a decedent dies leaving probate assets, a Personal Representative may be appointed to administer the decedent’s probate estate.  But what exactly are probate assets?  Probate assets are assets that are titled in a decedent’s sole name at death.  These include bank accounts and investment accounts titled in an individual’s name (with no transfer on death), and real estate held individually or as tenants-in-common.  Probate assets may also include retirement accounts or life insurance policies if a decedent’s estate was named as beneficiary, or if a decedent failed to name a beneficiary altogether.

Probate assets do not include jointly held property, including real estate held as joint tenants or tenants by the entirety, transfer on death accounts, retirement accounts with a named beneficiary, life insurance policies with a named beneficiary, or assets titled in trust prior to death.  Assets located outside of Massachusetts may also be probate assets. If these assets cannot be brought into Massachusetts (for example, real estate), a separate proceeding in the court of applicable jurisdiction will be required in order to allow for the Personal Representative to administer those assets.

When a Personal Representative is appointed by the Probate Court, he or she will be provided with Letters of Authority from the Court which grant the Personal Representative’s legal authority to act on behalf of the estate.  Following the Personal Representative’s appointment, the Personal Representative (through his/her Attorney) will obtain a tax identification number for the estate.  The Personal Representative can use this number, along with the Letters of Authority, to open an estate bank account.  Once appointed, the Personal Representative will be able to collect funds held in the decedent’s accounts, and deposit them in the estate account.  The Personal Representative will also have authority to sell probate assets, such as real estate, and deposit the net sales proceeds in this account.  The estate account can be used to pay debts and estate administration expenses, and can hold assets prior to distribution to the beneficiaries of the decedent’s estate.

Estate planning clients are often encouraged to minimize probate assets through proper lifetime planning and there are many reasons to do so.  For example, documents filed in connection with the probate process, including a decedent’s Will and forms identifying probate assets and beneficiaries, are accessible to the general public.  In addition, probate assets can only be accessed by the Personal Representative once appointed.  Depending on the probate process, the appointment of a Personal Representative can take upward of a couple of months.  This means that assets titled in a decedent’s name may not be accessible to pay outstanding debts or administration expenses, or to provide for a surviving spouse or dependents, until a Personal Representative has been appointed.  Further, minimizing or eliminating probate entirely can reduce the cost of estate administration.

One way to minimize probate is by creating a revocable estate planning trust and titling assets in such trust during lifetime.  Since assets titled in trust do not pass through probate, the trustee will have immediate access to the trust assets and will not need to wait for the appointment of a Personal Representative.  Creating and funding a revocable estate planning trust may also minimize estate taxes at death.

You should always consult an attorney to determine the proper titling of assets and appropriate beneficiary designations for retirement accounts and life insurance policies.

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