Legacy Law Blog

Probate is the legal process through which a court oversees the distribution of a deceased person’s estate, including paying off any debts and ensuring that assets reach the rightful heirs.

Understanding which assets are subject to probate—and which are not—is essential for anyone considering an estate plan or in need of estate administration services. In this post, we’ll break down the types of assets included in probate, those that bypass the process and why this distinction matters.

What Does Probate Cover?

In simple terms, probate applies to assets owned solely by the deceased without a designated beneficiary. These assets, known as probate assets, need court oversight to ensure they’re distributed according to the deceased person’s will or, if no will exists, according to state law.

Which Assets Are Typically Included in Probate?

Individually Owned Property
Assets solely in the deceased’s name are generally subject to probate. This includes things like:

• Bank accounts without a designated beneficiary
• Real estate titled solely in the decedent’s name
• Vehicles registered solely to the decedent
• Personal items like jewelry, art and collectibles

Ownership Interests in Certain Businesses – If the decedent owned shares in a small business, a partnership or other privately held business interests without a succession plan, these interests are likely subject to probate.

Assets Without Beneficiary Designations – Some accounts, like certain investment accounts, savings bonds and brokerage accounts, may not have a named beneficiary. If the owner did not set up payable-on-death or transfer-on-death designations, these assets will likely need to go through probate.

Assets Not Held in a Trust – Trusts are often used to avoid probate, but assets not transferred into a trust will go through the probate process, even if a trust exists.

Which Assets Are Transferred Outside of Probate?

Certain assets can bypass probate altogether, going directly to the named beneficiary or co-owner. Non-probate assets don’t require court intervention and are generally transferred more quickly and privately to heirs. Here’s a look at common non-probate assets:

Jointly Owned Property with Rights of Survivorship – Assets like real estate or bank accounts titled with “joint tenancy with right of survivorship” or “tenancy by the entirety” automatically pass to the surviving owner. This means that if a spouse or other co-owner survives, probate isn’t necessary to transfer ownership.

Accounts with Beneficiary Designations – Assets that allow you to name a beneficiary, such as life insurance policies, retirement accounts (like IRAs and 401(k)s), and some bank accounts, can pass directly to the beneficiary without probate. If a beneficiary is named, the account transfers immediately upon the account holder’s death.

Transfer-on-Death and Payable-on-Death Accounts – Certain bank and brokerage accounts allow you to designate a Payable on Death (POD) or Transfer on Death (TOD) beneficiary. When you pass away, the account is transferred directly to the named individual(s) without probate.

Assets Held in Trusts – Trusts are commonly used to avoid probate altogether. When assets are transferred to a living trust, they are legally owned by the trust, and upon the owner’s death, the assets go directly to beneficiaries according to the trust’s instructions—avoiding probate.

Small Estates – Some states offer a simplified probate or exemption for estates valued below a certain threshold. Michigan, for example, allows for a simplified process for estates valued under a certain amount. These small estates may avoid court involvement, though they must still meet specific criteria.

Why Does It Matter if an Asset Goes Through Probate?

Understanding which assets go through probate and which don’t, can save time, reduce costs, and offer privacy for the family. Probate can take months, even years, and it may involve court fees and legal expenses, which reduce the estate’s value.

Additionally, probate records are public, meaning details about the estate’s assets and beneficiaries become accessible to anyone. Non-probate assets, on the other hand, typically transfer privately and can be distributed more quickly, allowing beneficiaries access to funds and property sooner.

Strategies and Techniques to Minimize Probate Assets

If you want to reduce probate exposure in your estate, there are several strategies you can consider:

Create a Living Trust – Assets held in a living trust bypass probate and go directly to beneficiaries.

Add Beneficiary Designations – Ensure all applicable accounts have beneficiaries or are designated as TOD/POD. Typically, the beneficiaries can simply claim the proceeds by presenting their photo ID and a copy of the owner’s death certificate.

Consider Joint Ownership – For some assets, joint ownership with survivorship rights can keep them out of probate.

Lady Bird Deeds – in Michigan, state law allows real estate to pass to named beneficiaries on the deed immediately upon the death of the owner. Not all states allow this technique, but Michigan real estate owners can take advantage of it.

Explore Gifting During Your Lifetime – Giving assets as gifts before you pass can remove them from your estate entirely. There are certain gift tax implications above a certain amount each year, but gifting can be highly effective if planned properly.

Final Thoughts

Not all assets are subject to probate, and knowing the difference is vital for effective estate planning. By structuring your estate to minimize probate assets, you can help ensure that your loved ones receive their inheritance faster and with fewer complications.

If you’re unsure about the best approach for your estate, consulting with an estate planning attorney can provide you with guidance tailored to your unique circumstances.