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Categorizing Estate Assets [Probate, Non-Probate and Other?]

Categorizing Estate Assets

You may know that probate administration in Florida is likely to occur whenever an individual dies with assets titled in his or her individual name. If you have a Florida revocable living trust, you may also know that this tool is designed to avoid the probate process. However, without knowing more categorizing estate assets AND what does and does not constitute a probate asset, your estate may end up in probate despite your best planning intentions. You also need to know that some assets may be deemed “non-probate” assets even if they are not titled in your revocable living trust. All this “stuff” is the subject of this week’s article.

Recognizing Probate and Non-Probate Assets in Florida

As a bit of review, probate assets are those assets titled in the name of the deceased person alone and which do not list a beneficiary, and assets that are not properly transferred to a revocable living trust may be subject to probate.  By “transferred” I mean that most assets must be re-titled (re-named) so that the trust owns them and not the individual or married couple. This process of re-titling asset assets is called trust funding in Florida.

Categorizing Assets in a Florida Revocable Living Trust

For those of you without an understanding of revocable living trusts, this is essentially a contract to govern your estate plan. This contract empowers the trustee to manage the trust property for the benefit of one or more beneficiaries. It is created by declaring that property is going to be maintained for the benefit of one self or someone else. It may also be for the benefit of a class of persons. A revocable living trust, like most contracts, is not filed of public record anywhere and uses your social security number for tax purposes. This is a key difference between revocable and irrevocable trusts in Florida. So, property that is titled in a revocable living trust, will ideally avoid the probate process.

Categorizing Property that Passes by Beneficiary Designation

In addition, property that passes by a beneficiary designation, such as an IRA, 401(k) or life insurance policy, is generally also not subject to probate and would be considered a non-probate asset. The assets of the revocable living trust as well as other non-probate assets are still subject to the administration of the estate, which includes the payment of debts and the satisfaction of creditors.  If all the estate assets are in your revocable living trust, then this administration would be a “trust administration in Florida” by definition.

Trust Administration verses Probate Administration in Florida

A trust administration or “other administration” that is “non-probate” is a private process, whereas probate is a court supervised process for finalizing the financial affairs of a deceased person. A probate administration may be formal, summary or non-court supervised, depending on the nature of the probate assets. It is the process of proving to a probate court that the will is genuine. It is initiated by filing a petition for probate with the court.

The probate court supervises the disbursement of the probate assets, and is specialized and greatly detailed within state law. If there are probate assets in more than one state, an ancillary administration may be needed in those states.

A few more handy “tid bits” about assets are:

Categorizing Personal Property 

Property that has no title (personal property) should be designated in a memorandum that is referenced in a will or trust. Property that has no title may or may not be within the reach of the probate court; however, it may establish and represent the right to receive something of value from the estate. Also, property held by a married couple is generally considered to belong to the marriage rather than to the husband or the wife individually.  How marital property is treated will depend upon the jurisdiction and whether it is a Community Property State (i.e. California) or a Tenancy by the Entirety State (i.e. Florida).

The “take away” from all of this is to understand that nature of your assets now, so there are no surprises down the road. All of this is necessary to assist in your estate planning process AND avoid unnecessary confusion upon the passing of a loved one.

Steve Gibbs, Esq.

This is an updated version of an article originally published on April 21, 2016. 

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