Blog
All about probate, part 2
by Mandy Hicks
Editor’s note: This is the second of two blog posts exploring probate: what it is, how it works and what Kentucky law has to say about this process. You can read the first in the series here.
By Leah Morrison, Attorney
English, Lucas, Priest and Owsley, LLP
Probate is one of those things that people universally dismiss as an unduly burdensome process. In fact, many clients tell me they need a will or estate plan so that they can avoid probate.
Outside of the small estate scenario that we explored in the first blog post, Kentucky law provides additional mechanisms for avoiding probate. Not everyone has a Will. Perhaps most often people do not want to write one because they don’t want to think about dying, or they plan to write one and simply put it off. Some purposefully choose intestacy. Even without any planning not all assets owned by the decedent are subject to the probate process. Probate assets include everything the decedent owned in his or her individual name.
These can include:
- bank accounts;
- brokerage accounts;
- real estate held in the decedent’s individual name or in a tenancy in common;
- vehicles;
- furniture;
- jewelry; and
- an interest in a partnership, corporation, or limited liability company.
But certain assets are not probate assets and ownership of these assets will pass altogether outside of the court’s supervision. These can include:
- real property that is held in joint tenancy or tenancy by the entirety;
- bank or brokerage accounts held in joint tenancy or with payable on death or transfer on death beneficiaries;
- trusts;
- life insurance or brokerage accounts that list someone other than the decedent as the beneficiary; and
- retirement accounts.
Review beneficiaries often
Many non-probate assets are designated as such because ownership can pass directly to another individual without having to pass through the court’s purview. However, the nature of an asset – whether probate or non-probate – can often be altered by the decedent’s beneficiary designation. For example, some people choose to designate their estates as the beneficiary of their life insurance policies. In such cases, the policy proceeds will no longer be considered non-probate, and will become a probate asset because they belong first to the estate, and must be disposed of by the decedent’s Will or the statutory plan of descent. It is a good idea to review who is designated as a beneficiary on insurance policies and pension funds periodically. Many times, people fail to change the beneficiary when a spouse or another designated beneficiary has died.
It is also immensely crucial to review these beneficiary designations in the event of a divorce. A divorce will not affect a beneficiary designation whatsoever, and if the designation remains unchanged, the proceeds will be paid out to the decedent’s former spouse. You can see why this would be vastly important to review. The nature of non-probate assets are in the designation and the fact that they do not need court supervision to change ownership. Because of this lack of supervision, whatever is on that designation form in its final version is how the proceeds will be paid out.
How to plan
Estate planning can be tricky. As we’ve outlined, there are certain ways the law dictates that assets need to be handled, and you do need at the very least a basic will that outlines what you want to have happen with most of your estate.
There may be instances, though, in which you do not want assets handled by a trust, will or other legal document. We can help you determine the best path. Contact me, attorney Leah Morrison, for assistance in planning your estate. You can reach me at (270) 781-6500 or lmorrison@elpolaw.com.