Understanding Non Probate Assets in Massachusetts
Unlocking the Secrets: Which Assets Skip Probate?Estate planning is all about securing your family's future and simplifying the process for them when the time comes. One of the key objectives is often to avoid the complexities of probate court.
But do you know which of your assets will bypass probate? Let's dive into the world of non-probate assets, demystifying what they are, when they might become subject to probate, and their implications for Massachusetts estate taxes. What Are Non Probate AssetsNon-probate assets are those that seamlessly transfer to their intended recipients without the need for probate court intervention. Here are some examples:
When Non Probate Assets Become Probate AssetsKeeping your beneficiary designations up-to-date is crucial. If you neglect this, some non-probate assets might unintentionally end up in probate. For instance, if your life insurance beneficiary predeceases you, the proceeds might default to your estate, subjecting them to probate proceedings.
To prevent this, consider listing contingent beneficiaries. By designating your spouse as the primary beneficiary and your children as contingent beneficiaries, you ensure a seamless transfer to your children if your spouse passes away before you. Remember, even though these assets might not go through probate, their values are still considered when determining your taxable estate. |
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Non Probate Does Not Mean Not Taxable
A common misconception is that non-probate assets are exempt from estate taxes. This misunderstanding can have costly consequences. Assets such as your home, life insurance policies, and retirement accounts are still counted when calculating your taxable estate. So, even if these assets pass automatically, they remain part of the estate tax calculation.
For example, if you possess $500,000 in retirement savings, a $1m life insurance policy, and $500,000 in home equity, you'll have a taxable estate in Massachusetts, despite none of these assets passing through probate.
For example, if you possess $500,000 in retirement savings, a $1m life insurance policy, and $500,000 in home equity, you'll have a taxable estate in Massachusetts, despite none of these assets passing through probate.
Planning for Non Probate Assets
To navigate this intricate terrain, remember these essential steps:
- Review Beneficiary Designations: Periodically check your beneficiary designations to ensure they're current and align with your wishes.
- Consult an Estate Planning Attorney: Seek advice from an estate planning attorney to understand your estate tax planning options. Especially for married couples, there are strategies to protect some or all of these assets from taxes.
- Consider Establishing Trusts: If contingent beneficiaries are minors, contemplate establishing trusts to receive the assets. This eliminates the need for future court proceedings to manage their inheritance.
Meet Our Estate Planning and Probate Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna wrote a book on estate planning: The Road to Peace of Mind: What You Need to Know About Estate Planning. Jenna has helped many individuals and families with planning to protect their legacies and loved ones, and planning for the future and succession of their businesses.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and earned her LLM in estate planning from Western New England Scool of Law in 2016. She has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped many clients with planning for their legacies and their future, and navigating the probate process in Massachusetts after the death of a loved one.
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