When you die and you have a certain amount of wealth, your estate will go through the process of probate. Simply put, all of your assets are gathered and any outstanding debts are paid, including outstanding taxes. The proceeds from this process are then distributed according to your will or by state law if there is no will. There are, however, certain assets that are exempt from the probate process. The following are the most significant.
This is at the top of the list. As long as the insurance policy has a beneficiary listed, the money will be paid to this person. This is true regardless of the outstanding debt that is owed by the deceased. In the case where there is more debt owed than the assets of the deceased, the insurance policy is still paid to the beneficiary. This is true even if the life insurance is not mentioned in the will. It is the beneficiary listed on the policy that matters, so you never have to be concerned about your life insurance being used for debts.
Joint bank accounts
There is no attempt to sort out how much of the money in a joint bank account belongs to one person versus the other. It is assumed that the money was shared, and because it was commingled, the person who is still living will then have full possession of the funds.
Joint property ownership
In the case where two people own a piece of property together, the living person will become full owner when the other person dies. This is usually a straightforward process. Joint property is not confusing because the title will be in both names. An example of this would be a car or a house. All that is needed by the surviving partner is a death certificate and the title can be switched over to the surviving partner.
Any assets that have been deemed payable on death
Although not well known to many people, a POD account can be set up and operates similar to a life insurance policy at the time of your death. You select the beneficiary, and after you die, these funds are then paid to this person just as a life insurance policy would pay out after you die. A POD account usually takes the form of a bank account and is a valuable tool for estate planning.
Exactly which assets are a part of the probate process is dependent upon the state that you reside in. To be sure you understand the laws, you need to consult with a probate lawyer while you are still living.Share