One of the biggest myths regarding estate planning is the fact that many believe that because they don’t live in a mansion, drive a luxury vehicle, or their net worth isn’t seven figures, they don’t have an estate. They mistakenly believe that they don’t have an estate and therefore, don’t need an estate plan. However, the reality is most adults have an estate. Your estate consists of everything you own. If you die without an estate plan, how your estate is distributed depends on whether the assets are included in the probate estate or non-probate estate.
Probate Estate
A probate estate includes the assets that are transferred to your heirs through your will, or in the absence of a valid will, the assets that are transferred by the state’s laws of intestacy. Probate assets are subject to probate and the claims of creditors. Probate assets are generally assets that you have sole ownership at the time of death and may include:
- Real property titled solely in your name or jointly as tenant in common
- Personal property such as clothes, jewelry, automobile titled solely in your name
- Bank accounts with no joint owner or payable upon death and beneficiary designation
- Life insurance policy that lists the estate as the beneficiary
Non-Probate Estate
A non-probate estate includes the assets that are transferred to a named beneficiary upon your death in accordance with the terms of the respective instrument or some arrangement other than a will. Non-probate assets are not subject to probate. The following assets, if not made payable to your estate or to the personal representative of your estate, are transferred to the named surviving beneficiary or surviving joint owner upon your death:
- Joint bank accounts
- Transfer/Payable on Death accounts
- Property jointly titled with rights to survivorship
- Annuity, profit sharing, pension plans
- Retirement Accounts
- Social Security lump sum death benefits
- Assets held in a trust
- Lottery prize annuity
A non-probate estate seems like the perfect alternative to creating an estate plan, right? You name beneficiaries on your accounts and the assets are transferred upon your death without being subject to the probate process. While there are benefits to avoiding probate, there are risks in this seemingly perfect plan. Receipt of the benefits may have unintended consequences, to include disqualifying the beneficiaries for government assistance, or the assets being loss to creditors or predators.
To protect your assets and your loved ones and avoid unintended consequences, consult a licensed estate planning attorney in your state. For residents in Maryland and the District of Columbia, the Reed Sherman Law Firm can create a personalized estate plan to meet your needs. For additional information visitwww.ReedShermanLaw.comor click here to schedule a complimentary consultation.
