If you’re like most people, then the first thing that comes to mind when you hear the word “estate” is a sprawling mansion surrounded by acres of perfectly maintained landscaping. Maybe there’s even a marble fountain in the drive way or a lake in the backyard. Either way, the word “estate” tends to conjure up images of wealth and excess.
But legally speaking, the word “estate” has an entirely different meaning.
Legal Definition Of “Estate”
Technically speaking, an “estate” is all the property an individual owns at death, including:
- Personal property, like you car, jewelry, and furniture;
- Real estate, like your home (although the way your real estate is titled might take it out of your estate);
- Money, including bank accounts, life insurance policies, stocks and bonds, retirement accounts, and pensions.
- Debts, such as credit card debt, car loans, and mortgages.
Thus, “estate” is actually has a fairly simple definition. However, when you start looking at the practical implications, it can get more complicated, particularly when it comes to probate. That is because a person who passes away is usually considered to have a “probate estate” and a “non-probate estate.”
A person’s probate estate includes any asset that has to go through the probate process before it can be transferred to his or her heirs. These generally include:
- Real property that is titled solely in the decedent’s name or held as a tenant in common
- Personal property, such as jewelry, furniture, and automobiles
- Bank accounts that are solely in the decedent’s name
- An interest in a partnership, corporation, or limited liability company
- Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary
Some assets can skip the probate process, but only if they are properly titled or have a proper beneficiary designation. These include:
- Property that is held in joint tenancy
- Bank or brokerage accounts held in joint tenancy or with payable on death (POD) or transfer on death (TOD) beneficiaries
- Property held in a living trust
- Life insurance or brokerage accounts that list someone other than the decedent as the beneficiary
- Retirement accounts (IRAs, 401(k), etc.)
When planning your estate, you need to take into account whether property is probate property or non-probate property. It’s also important to remember that your will does not control the distribution of non-probate property. Check the ownership of your property and your accounts to make sure jointly owned property will be distributed the way you want it to. It is also important to review your beneficiary designations.
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