What is probate and why do I need to think about it?
Probate is a court approved process that ensures assets are properly transferred to beneficiaries and debts are paid in a proper order.
For the most part the assets that must go through probate are any assets that a person owns solely at the time of death that do not pass through a beneficiary designation.
Beneficiary Designations, which are commonly known as Transfer on Death (TOD) or Payable on Death (POD) are available for a lot of assets. You can name a beneficiary for your bank accounts, investment accounts, your Ohio real estate, your vehicles, and even business interests. For example, a savings account owned by a single person that does not have a Transfer on Death (TOD) or Payable on Death (POD) beneficiary will have to pass through the probate process.
On the other hand, if that same person had that same savings account with a TOD or POD beneficiary designation set up with the bank, the beneficiary can go directly to the bank to claim his or her funds. No probate needed.
Any assets that are jointly owned, like a joint checking account, or real estate owned as joint tenants with right of survivorship, typically become the property of the surviving owner without any involvement from the probate court. This is important to remember because someone who makes one of his or her children an owner of a bank account for the ease of access also gives the entire account balance to that surviving child account owner.
There are a few exceptions to the rule that solely owned assets without a beneficiary must go through probate, but the exceptions typically only apply to a surviving spouse. A surviving spouse may transfer an unlimited number of vehicles that are titled in the name as long as the combined value of those vehicles at the time of transfer does not exceed $65,000. This option is not available for a vehicle that has a Transfer on Death Beneficiary (other than the surviving spouse) listed on the title. This option is also unavailable for a vehicle that is left as a specific gift to a particular person in a Will. Only a surviving spouse may make such a transfer. Singles must make another plan.
While joint ownership and beneficiary designations can generally avoid probate for most assets, it is important to remember that the beneficiary must out live the decedent owner in order to take the property. Otherwise, the asset might need to be transferred through probate. If you have designated a beneficiary and that person dies before you, it’s important to immediately update that beneficiary designation.
As a final point, it’s important to remember that any asset with a living beneficiary will pass to the beneficiary even if the will leaves that asset to someone else. The beneficiary designation controls where an asset goes unless that beneficiary is deceased. This is why changing an estate plan is not always as simple as changing a will. The beneficiary designations must be updated too.