Most likely, yes, you do have an estate. Though “estate” tends to conjure a big home, surrounded by gardens and streams, and maybe even a horse or two, an estate is really just the sum total of everything you own. Think: bank account? Crypto? Car? Home? Even if you have a loan or mortgage, those assets are still part of your estate. Read on for tips about estate planning—it’s never too early.
Asset Inventory: Probate and Non Probate
The expression “settling affairs” refers to attending to the assets of someone who has died. Absent an estate plan, a probate court will use state laws of intestacy to determine how assets are distributed to next of kin. Asset distribution occurs only after debts are paid off. Usually, the probate court will appoint an administrator to take responsibility for the affairs of the deceased in accordance with the law. Typically, an administrator is a relative, but absent that, a close friend, or a professional, may be designated.
Once appointed by the court, an administrator has a fiduciary obligation to protect the estate and its beneficiaries. In many states, probate courts require administrators to obtain fiduciary bonds, sometimes referred to as administrator bonds, which serve as a guarantee that all duties will be performed in accordance with the law. Learn more here: administrator bonds.
Attorneys at Phelps LaClair point out that in preparation for estate planning, it’s wise to inventory your assets, since doing so informs decisions about creating a will or trust aligned to your circumstances and goals:
Your estate includes everything you own at the time of your death, whether it’s entirely in your name or jointly owned with someone else…..Depending on how they’re titled or assigned, they may have to go through probate before your heirs can take ownership. Common assets in a person’s estate include things like:
- Real estate holdings—Homes, land, and commercial or rental properties
- Bank accounts—Savings, checking, and certificates of deposit (CDs)
- Investments—Stocks, bonds, mutual funds, and brokerage accounts
- Personal property—Vehicles, jewelry, furniture, artwork, and other valuables
- Business interests—If you own a business or part of one, then it’s part of your estate
- Digital assets—Things like cryptocurrency, online businesses, and even social media accounts (depending on platform rules)
As you begin to think about an estate plan, keep in mind that assets classified as “non-probate” become available to designated beneficiaries faster, and more privately, than assets that must pass through the public process of probate. Examples of non-probate assets include:
- Retirement accounts—IRAs and 401(k)s with designated beneficiaries
- Life insurance policies—These assets always have named beneficiaries and are not subject to probate
- Payable-on-death or transfer-on-death accounts—These let you name a beneficiary who inherits the asset directly, like a bank account or vehicle
- Jointly-owned property—Like a home owned with a spouse that has rights of survivorship
- Assets in a living trust—Trusts not only avoid probate, they also give you more control over how and when your assets are distributed
Good To Know: Will Vs. Trust?
Towards preparing an estate plan tailored to your circumstances, it is helpful to understand the basic difference between using a will or trust as the anchor, and attorneys explain: “The most significant difference between wills and trusts is probate. Probate is the court-monitored process of transferring your assets to your loved ones. If you have a will, your assets will be administered through the probate process. Generally, if you have a trust, your assets will be transferred to your loved ones without probate.”
Keep in mind, however, that if you have minor children, you can only designate a guardian via a will. Though it tends to get a bad rap, remember too that probate is not inherently bad, and, in some cases, such as situations involving debts or conflicts, probate can be helpful. Probate processes have become more efficient in many states, and most even offer expedited procedures depending upon the level of assets involved. While most families will experience the probate process, thoughtful estate planning will enable them to avoid probate litigation.
Estate Law Practice?
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