What's In (And Not In) Your Probate Estate: A Quick Outline.

Your Will governs only those assets which fall within the probate estate. Accordingly, the probate estate is subject to administration by a probate court. However, there are many assets that are not part of the probate estate--they are not distributed by a Will and thus not subject to the probate court. 

Not long ago I discussed property that's ordinarily not distributed by a Will. To follow up on that, I decided to post this quick list of which assets are--and aren't--disposed of by a Will.

Below is a brief outline of the types of assets that generally fall into each category. This list is by no means exhaustive, but it covers the more common items.

Probate Assets (Distributed by Will):

• Real property titled in the decedent's name only or property in which the decedent is a tenant-in-common with other persons. This includes homestead, vacation property, business and rental properties.
  
• Personal property.
• Funds in bank accounts.
• Beneficiary assets with predeceased beneficiaries or no beneficiary designations. 
• An interest in a partnership, corporation, or limited liability company.
  
• Assets left out of a trust.
• Financial instruments that name the decedent or the decedent's estate as beneficiary.
  
• Any other assets titled solely in the decedent's name.
  

Non-Probate Assets (Not Distributed by Will):

• Real property titled jointly or subject to a transfer on death deed (TODD).
• Bank account funds jointly owned or subject to a payable on death (POD) provision naming someone else.
• Financial instruments with designated beneficiaries, such as life insurance policies, pension funds, investments, etc. 
• Motor vehicles registered with a POD provision in the titles.
  
• Property held in a trust. 

Avoiding Probate.

Administration by a probate court may be avoided in cases of certain small estates. This may be accomplished by executing a transfer on death deed for your real property. If the aggregate value of your remaining personal property is less than $75,000, probate may not be necessary. Setting up POD provisions on bank accounts and motor vehicle titles may enable you to lower the remaining probate estate value below that maximum.

A qualified estate planning attorney can help you sort through your assets and develop a strategy for preserving them for your loved ones.

Joint Tenancy vs. Tenancy In Common.

If two or more persons are purchasing real property, they have a few choices for how to hold title. The two most common are joint tenancy and tenancy in common.

Joint Tenancy.

Joint tenants are two or more owners who own equal shares of the property. Each owner's interest in the property is undivided, and all joint tenants have the right to use all of the property. Joint tenancy is typically the type of ownership among spouses. Joint tenancy includes the right of survivorship, which means that when one joint tenant passes away the surviving joint tenant automatically acquires ownership of the deceased person's share. The surviving joint tenant receives ownership without the property needing to be probated.

Tenancy in Common.

Tenants in common are two or more owners, who may own equal or unequal shares of the property. Tenants in common each own an undivided interest in the property and enjoy equal rights to use the property, even if their ownership share is unequal. Each tenant in common has the right to convey their share of the property and can transfer title.

Unlike joint tenancy, in the case of tenancy in common, there is no right of survivorship. When one tenant in common dies, that person's share passes to their heirs, and not to the other tenants in common. However, since the decedent's ownership interest passes through their estate, it may be subject to probate.

Tenancy in common is often used in cases when non-family members jointly own property, such as business property or a vacation home. Sometimes, spouses with children from prior relationships will choose tenancy in common, so that their shares can pass to their respective children after death.

If the deed does not specify the type of joint ownership, Minnesota law presumes the owners to be tenants in common.

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If you are in the process of purchasing real property, it would be prudent to talk to a qualified estate planning attorney to help determine what course of action is best for you and your family.