What makes up an estate?

Types of property and assets that make up an estate

• Any of your loved one's solely-owned assets that they did not make other arrangements for will become part of their probate estate.

• Probate assets need to go through a legal process to determine who their rightful owners are.

• Non-probate assets can be directly transferred to the named beneficiary upon notification of death.

• If your loved one is owed money by a friend, business, or tenant, these should be collected and added to the total value of the estate.

Saying your final goodbyes to a family member is all too often followed by a confusing sea of responsibilities you might feel unprepared for. But don’t worry: With some clarification, you’ll be able to handle the estate and focus instead on more important things like your family and honoring the person who is gone.

The probate process involves filing your loved one’s will if there is one, paying outstanding debts, distributing the assets to beneficiaries, and finally closing the estate. However, not everything the person owned goes through probate. And it might even be the case that you can avoid the full probate process.

Here’s a rundown on different types of property and assets, and how they’ll be treated under estate law. 

Probate assets

Unless your loved one took certain measures, as outlined below, any property that was under their sole ownership is now part of their estate and is subject to the probate process. This can include their residence or any land they owned, personal property like jewelry, furniture, or vehicles, and bank accounts. In less common cases, you might also find business interests, or a life insurance policy that names the estate as the beneficiary.

If you think your loved one’s estate will need to go through the full probate process, prepare for a lengthy and potentially expensive process in the coming months. Make sure you’re in close contact with other family members who will be involved and that you keep all the probate assets safe and secure until you will be able to distribute them. And most importantly, take good care of yourself by taking time away from thinking about paperwork and legal proceedings.

Depending on state laws, you may be able to avoid the full probate process and use a simplified procedure. This determination is generally based on the total value of the estate and the remaining debts, so familiarize yourself with the laws in the state where your loved one lived. We also strongly recommend that you consult a lawyer in the area.

Assets that aren’t property

There are certain cases where you might come across assets that aren’t considered property. Perhaps your loved one made a loan to a business or a friend, or is owed back payment for rent on a property. If this is the case, these owed debts are considered part of the overall value of your loved one’s estate. 

If you are the executor of the estate, it will be up to you to collect on these debts and include them in the estate funds. This may seem confrontational, but legally, you are within your rights to ask loanees to comply with their agreements, since you will be closing the estate. 

Non-probate assets

If your loved one spent time planning for their departure, you might find that many of their assets do not need to go through probate, because they made legal arrangements for them to pass to new owners in other ways.

There are many different kinds of trusts, but in general, assets placed in a trust will remain under the control of a trustee and will eventually be transferred to beneficiaries without the lengthy court process of probate. For this reason, many people choose to set these up for close family like children and grandchildren. These assets are not part of the probate estate because they were not owned by your loved one but by the trust itself when they passed away.

Retirement accounts and life insurance policies, likewise, will generally be distributed to their designated beneficiaries without going through probate.

In the case of joint ownership with right of survivorship of a residence or bank account (this is very common between spouses), the ownership will usually transfer to those co-owners upon the other owner’s death, once certain conditions are met.

Transferable-on-death (TOD) and payable-on-death (POD) accounts and deeds transfer assets to named beneficiaries once the correct documents are filed after the account holder’s passing.

Assets like these that pass to new owners outside of probate are not part of the probate estate, but that does not necessarily mean they are never considered estate assets.

For example, many non-probate assets such as life insurance and jointly owned accounts are still counted in your loved one's taxable estate when determining whether estate tax will be owed. And certain kinds of trusts, though they do not officially pass through probate, may be included in the estate for the purpose of paying back all creditors.

All of these assets are not technically under the control of the executor, as they are not subject to probate. However, in practice it is often the executor who notifies the beneficiaries or new owners of their status, as they are generally the ones who have access to the relevant documents.

Sometimes those who had time to prepare for their passing will have arranged for non-probate assets to cover most of their estate. In this case, you’ll be able to file the will and begin the process of distributing these assets immediately. It can be helpful to keep family members and other beneficiaries in the loop during this time so that everyone feels involved and informed. 

Try to take on the legal aspects of your loved one’s passing when you feel clear-headed and prepared. It can definitely feel confusing to take all this information in while you’re also processing a new reality without a person you loved. If you’re feeling overwhelmed by it all and simply can’t figure out the state of their affairs, seek the help of a financial or probate court advisor. They’ll be able to walk you through proper paperwork and steps to take to get the documents you need in order ●