What Assets Need to Be Listed for Probate?

If you've been named the administrator or executor of an estate, you'll need to take an inventory of property and possessions and determine what's subject to probate and what isn't. Only the assets considered "probate property" should be listed on forms filed with the probate court.

Probate is the legal process for paying a deceased person's debts and distributing money and property to heirs. It begins with a petition filed in probate court and proceeds through a series of steps, including inventorying the estate, notifying creditors, paying bills, filing taxes, and getting court approval to distribute property to heirs.

If you've been appointed as a personal representative (also known as executor or administrator) of a probate estate, one of your first tasks is to figure out what the deceased person owned.

Probate assets vs. non probate assets

Some assets are considered probate property—or assets that will be distributed to heirs based on the terms of a will or according to state law if there isn't a will. A probate asset might include personal items, real estate, vehicles, a bank account, and tenets-in-common assets.

Not all property is considered a probate asset. Other assets are non-probate property. These assets bypass the probate process and go directly to beneficiaries or co-owners, no matter what the will says. Non-probate assets might include a life insurance policy, retirement account, or other asset that has a listed beneficiary. Any property owned in a trust will also skip the probate process.

A non-probate/probate property list can help you keep track of what's subject to probate and show whether probate is even necessary.

What is probate property?

Probate property or probate assets are any property or items owned by a person who has passed away and will need to go through the probate process. All probate assets must go through the probate process for valuation and to determine what will happen next to the property. What happens next might be determined by a will or by the court for someone who died intestate, meaning they died without a will.

Probate assets will include property in which the decedent holds the title and is not jointly owned with others. If the asset is listed in a trust or has a named beneficiary, it can skip the probate process. Once property has been transferred to an heir, it is no longer considered a probate asset.

In most states, the personal representative must list all probate assets with their values and file the list with the probate court. You can also think of this as a list of assets for the will. 

Some assets, like bank accounts, are easy to put a value on. Others, like antiques, jewelry, and collectibles, may require an appraisal.

Probate assets can include:

• Real estate and vehicles. Titled assets owned solely by the deceased person will be part of the probate process.
• Personal property. Household items go through probate, along with clothing, jewelry, and collections. The inventory should include the decedent's personal belongings that remain after death. These items often don’t have a lot of monetary value but can have a lot of sentimental value to family members and friends.
• Bank accounts. If the account is solely owned by the decedent and isn’t payable on death, it will become part of the probate process.
• Stocks and bonds. If the investment accounts are listed solely in the decedent's name and do not list a beneficiary, they become part of probate. 
• Business assets. If the decedent owns part or all of a business, that must be valued, and the next steps are determined through probate.
• Tenants-in-common assets. This type of asset is jointly owned by multiple people and is subject to probate. Tenants in common don't have survivorship rights. The owners can bequeath their share of the property to someone else.

What is nonprobate property?

Because non-probate assets aren't part of the probate process, they aren't listed with the probate court. 

Non-probate can property include:

• Assets in a trust. Many people set up living trusts specifically to avoid probate. The trustee named in the trust is authorized to carry out the trust's instructions, including distributing trust assets to beneficiaries.
• Property with a named beneficiary. Common examples include life insurance policies, IRAs, 401(k)s, pensions, and medical savings accounts.
• Financial accounts with beneficiaries. These do not go through probate if they have a payable on death (POD) designation. Other property, such as real estate or vehicles, is non-probate property if there's a transfer on death (TOD) designation.
• Property owned jointly, with survivorship rights. This means that if one owner dies, the other owner automatically gets the deceased owner's interest in the property. Married couples often own their home this way. Look for the words "joint tenancy with right of survivorship" or "tenancy by the entirety" in the title documents. If you live in a community property state, your state laws may also provide a right of survivorship.

Once you've identified the assets that pass outside of probate, the remaining assets are probably part of the probate estate.

Buying and selling probate property

In general, an executor wants to maintain the value of an estate in order to distribute as much value and as many assets as possible to the heirs. Unfortunately, in some situations, assets must go through a probate sale in order to acquire cash to pay off debts or taxes incurred by the estate or the decedent prior to death.

If there are debts that must be paid, probate property can be sold with the probate court’s supervision. In general, debts will first be paid from liquid assets, such as from cash in financial accounts. If this is not enough, the court may supervise a probate sale for real estate or other property to acquire enough funds to pay down the debts.

If someone dies without a will and without known heirs, their estate will be liquidated and sold. The funds will be distributed to the closest relatives.

Property sold during probate proceedings is often sold at a lower value than market rate. This makes it a great deal for buyers and ensures a quick sale, getting liquid assets into the estate efficiently.

How to protect your probate assets

In some states, probate isn't required if the estate's value is below a certain dollar amount. Some states also have a simplified probate procedure for small estates or when all property is transferred to a surviving spouse. But even when probate isn't required, going through the process can have advantages.

Sorting through property and accounts can be tedious, and it's not always easy to tell what's subject to probate and what isn't. It's best to get legal advice if you have questions or aren't sure what property to list with the probate court.

If you want to take steps today to protect your property from probate laws, we recommend creating an estate plan. This might include:

1. Writing a will. This will help ensure that when your estate goes through the probate process, your wishes are taken into account. 
2. Designate a beneficiary (where possible). Many accounts, including bank and retirement accounts, allow you to name a beneficiary in case of your death. This allows the asset to be transferred to your beneficiary without it going through probate.
3. Set up a trust. Assets that are in a trust are not considered probate property and skip the probate process. Placing your assets in a trust can also help your estate avoid liquidation in order to pay off outstanding debts and avoid some taxes and fees. This means trust assets transfer to heirs instead of going through the probate process.

There are reasons for avoiding probate. The court process can take an extended amount of time while keeping assets away from heirs, and the process can cost a lot of money, whether you hire an attorney or not.

FAQs

When is probate property distributed to beneficiaries?

Probate property is distributed to beneficiaries once all debts have been paid and the probate court process is completed. The length of the court process depends upon your location and the size of the estate. It can take a few months all the way to a few years.

Who is responsible for managing probate property?

The executor of an estate is in charge of managing probate property and distributing the property based on the wishes of the decedent, which should be laid out in a will. 

What happens to assets if someone dies without a will?

If someone dies without a will, their estate becomes intestate. An intestate estate must go through the probate process so its assets can be distributed to beneficiaries or liquidated to pay off debts. It also means that your assets may not be distributed to your heirs as you wish them to be; instead, assets will be distributed according to state law. 

Jane Haskins, Esq., contributed to this article.