What is the Difference Between Probate and Non-Probate Assets?
When a person passes away in Pennsylvania, all property the deceased owned within the Commonwealth is either probate or non-probate property. It is important to determine into which category the assets fall to minimize the inheritance tax burden. Probate and non-probate assets are often treated differently for tax purposes depending on the classification.
What are Probate Assets?
Property that is considered part of the deceased person’s estate are considered probate assets. It is the responsibility of the estate’s personal representative, known as the executor or administrator, to gather and inventory all of the probate assets. The representative must provide an inventory of the assets to the Register of Wills and to the estate’s beneficiaries or heirs.
Probate assets will be distributed to the beneficiaries according to the deceased’s will after the estate’s debts and liabilities have been satisfied.
Most assets which are left by a deceased person are considered probate assets unless there is a legal exception.
What are Non-Probate Assets?
Any asset left by a deceased for which there is a legal exception is considered a non-probate asset. Non-probate assets are assets which pass directly to another person by operation of law. For example, a life insurance account that names a beneficiary will pass directly to that beneficiary upon death. The insurance monies do not flow through the estate because the life insurance contract directs payment to the beneficiary. Because the deceased had no claim on those proceeds upon death, the proceeds are excluded from the estate.
Examples of common non-probate assets may also include:
- Retirement accounts
- Trust assets
- Real estate held by married persons as tenancy by the entirety
- Real estate held with another person as a joint tenancy with a right of survivorship
- Transfer or payable on death accounts
One of the first steps to administering a deceased person’s estate is to determine which assets are probate and non-probate. Non-probate property is not controlled by the deceased’s will and is often not subject to Pennsylvania Inheritance Tax, subject to certain exceptions.
As a probate attorney to estate executors, I help settle estates efficiently and reduce stress. If you know someone faced with a probate process or roadblocks to a property sale, please have them contact us for a free evaluation at:
Phone: (215) 918-4242
If you are not quite ready for a consultation, download our probate handbook HERE. We’ll send you helpful probate guides and resources so you know how to handle the estate.