By Attorney Jennifer D. Kahl on Monday, January 14, 2019
People often use the term “probate assets” to refer to any assets owned by a person when the person dies. However, in Virginia, only certain assets belong in the probate estate. Use the following analysis to calculate the probate estate:
- Assets held in trust will be disposed of according to the terms of the trust agreement. These assets are not part of the probate estate.
- Assets that are owned jointly with rights of survivorship with another living person are the property of the surviving owner. These assets are not part of the probate estate. In Virginia, jointly owned bank accounts are assumed to be held with rights of survivorship.
- Assets that have a living beneficiary designation are the property of the beneficiary(ies). These assets are not part of the probate estate.
- By default, Virginia real estate automatically passes to the heirs listed in the Will or, if there is no will, to the decedent’s intestate heirs. Therefore, Virginia real estate is generally not part of the probate estate (certain exceptions apply).
If the assets in the probate estate are greater than $50,000, then formal probate proceedings are necessary. If the assets in the probate estate are less than $50,000, you will probably be able to take advantage of one of Virginia’s options for administering small estates.
The probate assets are the only assets that are controlled by the Will and handled by the Personal Representative. They are the only assets that receive oversight from the Court. Additionally, the probate assets are the only assets that are automatically subject to claims on the estate by creditors, minor children, or spouses. Though it is not impossible for claimants to pursue assets outside the estate, it is substantially more difficult.
Case Study 1: Dad is a widower. He has a Will that leaves everything equally to Son and Daughter. He owned the following assets:
- a house
- a car and an old truck
- a $50,000 IRA with Son and Daughter as beneficiaries
- a $40,000 checking account, owned jointly with daughter
- $70,000 worth of Dominion stock
(a) Dad doesn’t have a trust, so there aren’t any trust assets. (b) Daughter is a joint owner of the checking account, so it belongs to her now. She is not legally obligated to share it with her brother per the terms of the Will. This is because the Will only controls estate assets and this account is not in the estate. (c) Dad’s IRA goes to the two kids because they are the beneficiaries. (d) The house automatically passes to Son and Daughter, jointly, as tenants in common. Though the Will controls the disposition of this asset, it is not considered part of the estate (review the exceptions, here). (e) The Dominion stock and the vehicles are part of the probate estate and will be distributed according to the will. Because the value is over $50,000, the family must open a formal probate estate.
Case Study 2: Old Maid has a revocable living trust that names her cats as her beneficiaries (yes, you can leave stuff to your cats). She has a pour-over will that leaves everything to her trust. She dies with the following assets:
- Her house, titled in the name of the trust
- Her $20,000 checking account, owned jointly with Nephew
- Her brokerage account, worth $100,000
(a) Because the house is titled in the name of the trust, the terms of the trust will apply and the house will be managed (or more likely, sold) for the benefit of the cats. (b) Her checking account belongs to Nephew because he is the surviving joint owner. He is not obligated to put the money in the trust or give it to the cats. (c) She does not have any assets with beneficiary designations. (d) She does not have any real estate outside the trust. (e) Her brokerage account is part of her probate estate. Because it is over $50,000, it will have to go through probate. This is a bummer, because if she had properly funded her trust, she could have avoided probate. As it is, the terms of the Will control and the account will pass through the estate into the trust, where it will be used for the benefit of the cats.