Failing to title assets correctly is the number one wat we see people wreck their estate plans, an is right up there with having no Will or a poorly written one. Many people believe that just having a good Will or Trust set up is all they need. However, it is as important to have assets titled correctly as it is to have good documents. To understand this, below is a quick overview of the difference between probate and non-probate property.
Probate is, basically, the process of transferring ownership of assets that are held in the name of a deceased person. Common probate assets include real estate that is held as tenants-in-common (the default in South Carolina, and what the vast majority of people have whether they know it or not), accounts that were held in one person’s name, and vehicles titled in just one person’s name, just to name a few. These assets all have to go through the probate process, which is administered by the Probate Court in the county in which you reside at your death, along with every county in which you own assets that need to be probated.
Non-Probate property, on the other hand, includes accounts with beneficiary designations, payable on death or transfer on death beneficiaries, property owned jointly with the right of survivorship, or property in which you only own a life estate (as long as the remaindermen are set correctly). Common examples of Non-probate property include life insurance policies, investment accounts, IRAs, 401(k)s, jointly held bank accounts, and real estate owned jointly with a right of survivorship, just to name a few. However, this property is only non-probate property if the beneficiaries are set up correctly.
The reason this matters is that non-probate assets, since they avoid probate, are not controlled by the terms of your Will. So, if you wanted your estate to go half to each of your two children, but had one child named as a joint owner on your bank account (commonly done by parents when they feel like they might need “help” paying the bills, etc.), that child would get everything in that bank account and half of everything else. This can make a huge difference in how much each of your children get, and is one of the top reasons we have seen children wind up in expensive litigation and end up not speaking to one another for years, if ever again.
Also, you may think that just having both spouses names on a piece of real estate means it is safe from probate. This isn't true. Unless your deed explicitly says the real estate is owned jointy with right of survivorship, if something happens to one spouse, their half of the house has to go through probate, which means the surviving spouse could end up owing their home jointly with the deceased's spouse's children from a former marriage or the surviving spouse could be forced to sell the house to pay all of the deceased spouses's final bills. It is vital that you understand how your deed is set up and, if need be, have it fixed as soon as possible.
If you aren’t sure if your assets are titled correctly, that would be an excellent reason to schedule a free meeting with one of our attorneys. If you’re not quite ready to do that yet, give us a call to receive a copy of our FREE book, Five Reasons a Simple Will Might Not Be Enough, or request a copy right here on our website.