What Is Estate Property?

Executive Summary

• Estate property is any property that was owned by the decedent at the time of their death and can include real estate, valuable artwork, possessions like jewelry, and more.
• Estate assets can be divided into probate and non-probate property, with some assets able to avoid probate if ownership is transferred prior to death or if the necessary planning is done. 
• Proper estate planning can simplify the transfer of estate property to beneficiaries upon an individual’s death. 
• If you have disputes over which assets belong to an estate and how they should be distributed, you should consult a probate and estate administration attorney for support.  

Introduction 

Contrary to popular belief, an estate is more than just a mansion or piece of property. When someone passes away, all of the real estate and personal property that they currently own individually becomes “estate property.” This means that, until the property is distributed to the deceased’s heirs and beneficiaries, their assets are simply considered to belong to the estate. Estate property includes personal property like cash, stocks, vehicles, clothing, furniture, and jewelry, and real property like houses, land, and buildings. 

Estate property is often distributed to heirs and beneficiaries through a process called probate. However, estate property includes both probate assets and non-probate assets, which can be transferred to beneficiaries directly. Whether property is considered a probate asset or a non-probate asset greatly changes the process in which it is managed after the decedent’s death.

Understanding what constitutes estate property and how it should be handled can help interested parties understand and prepare for the estate administration process and secure access to their rightful inheritance. 

What Does The Estate of a Deceased Party Mean?

The estate is the full encompassment of property that belonged to a person when they died. Although commonly thought of as a large house or land, an estate can include any type of property, such as jewelry, artwork, furniture, cars, boats, investment accounts, and other financial assets.

Types of property in a deceased party’s estate can include: 

• Real estate – Real estate is land and any structures attached to that land permanently. These structures can include residential homes, commercial buildings, and even undeveloped land. 
• Personal property – Personal property includes any objects not attached to land, including items like cars, yachts, watches, jewelry, and luxury clothing.
• Financial assets – These assets include bank accounts and monetary investments, like bonds, crypto assets, equities, and more. 
• Intellectual property – This includes any works or property created by an individual, such as patents, copyrights, trademarks, and other related assets. 

After a person dies, the assets that encompass an estate are distributed through a process known as probate. Probate is the legal court process in which assets are gathered and distributed to the named beneficiaries. If a person had a will, then estate property is transferred to beneficiaries based on the terms laid out in the document.

However, if the person did not have a will, then estate property will have to pass through a type of probate known as intestate succession, where assets are distributed to legal beneficiaries according to state law. 

What Is the Difference Between Probate and Non-Probate Property?

Probate property is subject to probate, where a court supervises at least part of the estate administration, while non-probate property can pass to its new owner without the court’s involvement. Non-probate property often includes assets where the title has already been transferred during the decedent’s lifetime or when ownership transfers automatically at the time of the decedent’s death.

Most estate assets will be subject to probate. However, non-probate property can automatically transfer to named beneficiaries upon death. Assets may also be passed outside probate through the use of a living trust, which transfers ownership of a group of assets to a trustee to be distributed after the decedent’s death.

In California and Texas, non-probate property includes:

• Jointly owned property with right of survivorship, such as real estate and bank accounts.
• Bank, investment, and retirement accounts with designated beneficiaries.
• Life insurance proceeds with designated beneficiaries.
• Any assets held in trust.

Any of the above assets can avoid probate by being transferred directly to the designated beneficiaries on the respective title, account, or trust instrument. However, assets included in a will must still be transferred to beneficiaries through probate. 

What are TOD, POD, JTWROS, or Beneficiary Designations?

TOD and POD accounts, JTWROS property, and most other assets with a beneficiary designation are non-probate assets—this means they automatically pass to the beneficiary when the decedent dies without going through the probate process. Each of these designations has specific nuance on how the relevant assets are transferred.

Transfer on death (TOD) and payable on death (POD) designations

Many bank accounts, retirement accounts, Certificates of Deposit, brokerage accounts, and other investments are “transfer on death” (TOD) or  “payable on death” (POD) accounts. This means that the account owner can choose designated beneficiaries to receive the assets upon their death. However, the beneficiary has no interest in the account until the original owner passes away, and the account holder can change the beneficiary on an account at any time.

Joint tenant with right of survivorship (JTWROS) designation

“JTWROS” stands for “joint tenant with the right of survivorship.” This is a type of ownership where two or more parties own an asset, such as a bank account or real estate, together. Each owner has access to the property during their lifetime, and if one of the owners dies, the survivors inherit the deceased owner’s share of the property. For bank accounts, the joint owners have a right to the amount they have contributed to the account during the period of shared ownership.

Beneficiary designation

The term “beneficiary designation” refers to any situation where the owner of an asset identifies a specific person or persons to inherit it upon their death. Put simply, a beneficiary is the person in line to receive ownership of the assets after the original owner dies. 

This can refer to TOD, POD, or JTWROS accounts, as well as life insurance policies and other similar assets. However, a beneficiary designation is most commonly made through a last will and testament, where an individual specifies who should receive estate assets and under which terms. 

A beneficiary designation does not necessarily always allow assets to avoid probate. Unless they are considered non-probate assets, like those listed above, most assets outlined in a will to be distributed to a beneficiary must pass through probate in order for legal ownership to be transferred.

Can You Use Funds from a Joint Account after the Other Account Holder Dies?

Generally, yes, if you are one of the account holders, you can use funds from a joint account after the other party dies. Generally, most joint bank accounts have rights of survivorship unless otherwise specified in the account terms, which means the surviving owner will retain ownership of the money in the account upon the death of the other joint owner. As a result, the surviving individual can use the account freely and without interruption to their access to the funds.

However, you should check with your bank to verify that your joint account includes survivorship rights. In a rare instance where an account does not have these rights, then the deceased’s contributions to the account may have to pass through probate to determine how it should be distributed, according to either a will or intestate succession laws.  

How Do You Challenge Beneficiary Designations?

In some situations, you can contest a beneficiary designation in the probate court where the deceased person’s estate is being administered by initiating a will contest. However, you cannot challenge a beneficiary designation simply because you disagree with the inheritance they are offered. Instead, you must believe that there is some interference in the process that affected the validity of the designation.

Some grounds for challenging a beneficiary designation include:

• Conflicts with community property laws
• Divorce (when the beneficiary is a former spouse)
• Problems with the execution of the designation form
• Attempted but failed designations
• Mental incapacity
• Undue influence, duress, forgery, or fraud
• Disqualification of a beneficiary

If you want to challenge a beneficiary designation that you believe to be invalid, you should immediately contact a knowledgeable probate litigation lawyer. An experienced attorney can help you determine if you have a legal reason to contest the designation and explain your different options to you.

Special Considerations for Texas and California Probate Laws 

Probate laws differ by state, with each state having its own nuances on how estate property should be treated. Both Texas and California are similar but have unique considerations to keep in mind. 

Texas

In Texas, estate property usually must go through the probate process. Like most states, this process will involve appointing an executor to distribute any estate property either according to a will or according to state law if a will does not exist. 

However, if the total value of estate property is below the threshold of $75,000, then the heirs can avoid the time, cost, and complexity of a full probate by using a small estate affidavit, as described in Texas Estate Codes §205.001. The benefit of this process is that it is faster and less costly than having to navigate the full court process of probate. 

Another important consideration is that Texas does not have estate or inheritance taxes, which means that estate property being transferred to beneficiaries is not subject to taxes. 

California

As is the case in Texas, most assets in California must pass through the probate process. If a decedent left a will, estate property will be distributed according to the terms laid out in the will. If they did not leave a will, the estate will be distributed to legal heirs according to state law.

However, according to California Probate Code §13100, if the total value of estate property in California is below the threshold of $184,500, the property can be distributed to beneficiaries while avoiding full probate. Instead, small estates can use a simplified process known as a small estate affidavit to transfer property directly to beneficiaries without the appointment of a personal representative. Keep in mind that California adjusts the threshold for a small estate every three years. 

Like Texas, California does not impose an estate or inheritance tax on estate property.

How To Avoid Probate with Proper Estate Planning 

Although probate is often necessary to distribute assets to beneficiaries, there are some ways to either avoid probate or at least simplify the transfer of these assets. In many cases, proper estate planning can help prevent the need for probate entirely. 

Using a Trust to Avoid Probate and Protect Estate Assets 

The easiest way to transfer assets to beneficiaries while avoiding probate is to use a trust. A trust transfers ownership of estate assets to a reliable individual, known as a trustee. The trustee will control the assets and then distribute assets according to the terms outlined in a trust instrument. 

There are different types of trust that can be used to protect estate assets—the most common are: 

• Revocable trust – A revocable trust is a trust that can be altered by the creator at any time before their death. 
• Irrevocable trust – An irrevocable trust is much harder to alter once established and can only be changed if agreed upon by the creator and all interested parties.
• Living trust – A living trust is established during a person’s lifetime, and the assets are immediately transferred into the trust.
• Testamentary trust – A testamentary trust is established upon a person’s death and any assets named in the trust instrument only transfer to the trust upon their death.

An estate planning attorney can help you establish the best trust for your circumstances. If a loved one has established a trust and you are unsure of how it affects the probate process or it is complicating the distribution of assets, you should contact a trust administration attorney. 

Designating Beneficiaries To Simplify Estate Distribution 

Identifying beneficiaries for your estate will make it clear who should receive ownership of assets upon your death. For assets that allow you to specify a beneficiary, like a life insurance policy or bank account, you should double-check that you have a listed beneficiary for your applicable accounts. 

You should also consider reviewing your beneficiaries for accounts yearly. Your preferred beneficiaries for your assets may change over time, so checking this regularly will allow you to make any adjustments to your estate plan. 

Most importantly, you should create a last will and testament to identify beneficiaries for all remaining assets. In this document you can list your assets, who you prefer to receive them, and under what terms. A will makes your wishes clear, allows for a simpler transfer of assets upon your death, and avoids questions about who should receive your estate property upon your death. 

If an individual does not create a will to designate beneficiaries for specific assets, these assets will be distributed through a process known as intestate succession. If an estate must pass through intestate succession, there is the risk that assets will be distributed in a way that conflicts with the decedent’s interests.

Creating a Comprehensive Estate Plan To Protect Your Loved Ones 

A comprehensive estate plan will ensure all your assets are accounted for upon your death, simplifying how they will be distributed and eliminating ambiguity. Without an estate plan, assets will be distributed to legal heirs and beneficiaries according to state law.  

A comprehensive estate plan may look different for everyone based on the complexity of their estate, the number of assets, and the number of beneficiaries. You should consult a team of experts to help you determine the best estate planning tools for you and your assets. This team might include an estate planning attorney, financial advisors, and tax specialists who can guide you in understanding your options.

After establishing your estate plan, you should be sure to update it regularly. 

Life events like marriage, divorce, and childbirth can all affect your estate plan by encouraging you to change distribution percentages or even identify different beneficiaries.

Secure Your Rightful Inheritance of Estate Property

Estate property includes any property that belonged to an individual when they passed. Assets can be considered either probate assets or non-probate assets, depending on how assets must be transferred to new owners according to the law. If you are seeking clarity around an inheritance or have questions about how to handle estate property, you should seek the support of a probate and estate administration attorney.

Our attorneys at RMO support personal representatives, beneficiaries, and other interested parties in understanding estate property and how it should be distributed to beneficiaries and heirs. Whether you are unclear on an aspect of the probate process or have concerns regarding the distribution of assets, our attorneys can help. Whatever the case, our goal is to build a winning strategy to help you secure your access to your rightful inheritance. 

Schedule a free consultation with our team at RMO Lawyers to lay out your concerns and learn more about how we can help you understand and navigate the probate process.