Estate Planning for Non-Probate Assets

POST DATE: 1.23.24
Ccha  Estate Planning

Even if you have a simple estate that will go through probate, estate planning is hard enough. However, many people fail to recognize that some assets are exempt from probate. Instead, they go directly to the beneficiary without needing any legal oversight. People call these items non-probate assets. Non-probate assets include payable-on-death accounts and life insurance plans. Consequently, it’s a good idea to consider these assets when planning your estate.

Read on to learn more about estate planning for non-probate assets. We’ll discuss the kinds of assets that qualify as non-probate assets, how they compare to probate assets, and other implications for your future.

Need more answers? Simply call the talented team at Church Church Hittle and Antrim today for the quality legal assistance you deserve.

Probate Assets vs. Non-Probate Assets

So, what’s the difference between probate assets and non-probate assets?

Probate assets are those that require the guiding hand of a court to reach their new owners. This typically occurs through the probate process. During probate, a court supervises the validation of a will (if there is a will). It then settles any outstanding debts and distributes the will’s assets to beneficiaries. If the decedent has no will, then the court will follow applicable state law. Examples of probate assets include:

  • Real estate, including parcels of land and single-family homes;

  • Personal belongings like cars, jewelry, and furniture;

  • Bank accounts; and

  • Investments or business interests.

Only real estate and accounts solely in the decedent’s name go to probate. These assets do not need to go to probate if they are jointly owned by the decedent and another individual.

On the other hand, non-probate assets bypass the probate process. Therefore, they pass directly from the decedent to their beneficiaries. Common non-probate assets include:

  • Retirement accounts like IRAs and 401(k)s that have a beneficiary designation;

  • Jointly held properties with the right of survivorship; and

  • Transfer-on-death or payable-on-death accounts.

Under Indiana’s life insurance beneficiary rules, a life insurance policy provides benefits to the applicable beneficiary upon the insured’s death. However, you can make the life insurance policy a probate asset. If you follow that path, Indiana law requires the insurance company to pay benefits within 60 days of receiving proof of probate of the will.


How Do Non-Probate Assets Affect My Estate Plans?

Non-probate assets can play a substantial role in your estate plans. As such, you need to understand what non-probate assets are and how to designate them. Doing so allows for a smoother and more direct property transfer to your loved ones. It also minimizes the time and expense of probate court by narrowing the catalog of probate assets.

Understanding non-probate assets prevents unintentional transfers that go against your intentions. Let’s use a hypothetical example to illustrate.

Sarah is passionate about being proactive with her estate. Part of this passion comes from her negative experience going through probate court after her father died without a will. Last year, Sarah meticulously drafted her will, believing it to be the master key to her estate planning. She carefully outlined her wishes for her home, car, and beloved art collection. However, she failed to discuss anything regarding her substantial investment portfolio. In addition, she forgot that her portfolio already has a beneficiary designation that Sarah made years ago. The beneficiary is Sarah’s old friend with whom she lost touch a long time.

Unaware that this is a non-probate asset, Sarah doesn't mention the portfolio in her will even though she intends these investments to benefit her art-loving nephew. Upon Sarah’s passing, the investment portfolio sails smoothly into the hands of the old friend despite Sarah’s detailed will. Consequently, a simple oversight led to a situation that bypassed Sarah’s wishes and left her nephew empty-handed. This example shows why it’s vital to designate probate and non-probate assets in your will.

Let Us Put Your Mind at Ease

Non-probate assets are just one of many tricky parts of estate planning. Together, these topics can make estate planning a daunting endeavor. Nonetheless, understanding and effectively planning these assets is crucial for securing your financial future. In this journey, you need not venture alone. CCHA Law stands ready to guide you through this labyrinth. Our team has been steeped in estate planning for over 100 years. We’re dedicated to helping you chart the most beneficial course for your retirement assets. With our experienced attorneys at your side, you can confidently choose how to dispose of your non-probate assets in a way that aligns with your value. Don’t leave the future of your estate to the winds of fate. Contact us today, and we’ll partner with you to build a better, more secure future for your retirement.