When a loved one passes away, managing their estate can become a challenging task. It can be even more difficult if their assets need to go through the probate process. A person’s estate – which can include everything from real estate to personal belongings – will go through probate in Michigan if the assets are solely in their name or if there is no designated beneficiary.
This means that even if you have a will, the assets there will still need to go through probate because they are still under your name. In contrast, when you place assets in a trust, the ownership of these transfers from you to the trust itself. This allows them to not have to go through the probate process.
Certain types of assets can also automatically skip probate because of their designated transfer mechanisms. This includes:
Real estate owned as joint tenants with right of survivorship
This is a type of property ownership where two or more individuals share equal ownership. If one of the owners passes away, the remaining owner(s) automatically receive the deceased person’s portion of the property. This type of ownership is common among spouses and allows the property to transfer without going through probate. For this to work, the deed must explicitly include a “right of survivorship” clause.
Life insurance policies and retirement accounts
Life insurance policies provide a financial payout to designated beneficiaries upon the policyholder’s death. Retirement accounts, like IRAs and 401(k)s, are savings plans that help individuals save for retirement. When the account holder or policyholder passes away, the funds go directly to the beneficiaries listed. It’s crucial to regularly review and update your beneficiary designations to ensure they align with your current wishes.
Bank accounts with Payable on Death (POD) or Transfer on Death (TOD) clauses
POD or TOD accounts are special bank account options that allow you to name a beneficiary who will receive the funds directly when you pass away. These clauses ensure that the assets go to the beneficiary without the need for probate. Setting up a POD or TOD designation is straightforward. You can request the necessary forms from your bank or financial institution to establish who will receive the account’s funds after your death.
Planning ahead is key
Estate planning is crucial in ensuring your assets transfer smoothly to your heirs. By understanding which assets can skip probate, you can reduce the legal and financial burdens on your loved ones. Consider reviewing your estate plan with a legal professional.
