When a person dies, they leave behind their estate. Sometimes, that includes debt. The reason estate administration and probate administration are so similar is because they both refer to the process of collecting the decedent’s assets, paying their debts and distributing the remaining assets to the heirs and/or beneficiaries.
Estate administration is a broad term, covering all activities associated with managing and settling a deceased person’s estate. It can involve both probate and non-probate assets. On the other hand, probate administration is only one part of estate administration.
Understanding non-probate and probate assets
While probate administration also refers to the process of administering a deceased person’s assets, it is court-supervised and only involves the decedent’s probate assets. Certain assets do not need to go through probate. Non-probate assets include:
- Life insurance
- Pay-On-Death (POD) Accounts
- Transfer-On-Death (TOD) Assets
- Pension plans and retirement benefits such as 401(k)s, IRAs, TSAs
- Personal and real property held in a trust
- Property or real estate owned as joint tenants with rights to survivorship
- Bank accounts held in joint tenancy
A will does not avoid probate. If the decedent only had a will, then probate is required to determine its validity before the named executor can administer the probate estate accordingly. Probate assets typically include the following:
- Real estate
- Bank accounts
- Stocks and bonds
- Business Interests and intellectual property
- Personal property
If the decedent applied estate planning tools and used them to avoid probate intentionally, then probate administration may no longer be necessary. Therefore, an estate administrator or executor should know how to properly gather, document and classify assets to ensure they accurately fulfill the decedent’s intentions.
The importance of knowing the difference
The processes for estate and probate administration involve different legal requirements and deadlines. Non-probate assets could go to the beneficiaries directly without the oversight of the probate court. However, probate is also important because it grants the estate administrator the authority to take charge of the estate and ensures that they do it correctly.
Knowing the exact terms involved in estate administration and understanding the differences could save time and money. It would make the estate administrator’s job much more manageable and help them avoid legal problems.