The question of whether a decedent owned an asset on their own or with someone else will affect whether the asset needs to go through the probate process. If they owned an asset with someone else, an executor will want to identify the form of ownership, such as a joint tenancy or a tenancy by the entirety. Some assets are payable-on-death or transfer-on-death, which means that they can be distributed to the named beneficiary directly without going through probate.
First, you should review the title document for the asset, such as a deed to real estate. Even if this suggests that the decedent solely owned the asset, however, this may not be the end of the story. Sometimes state laws or agreements between the decedent and someone else will have changed the asset’s ownership. For example, some community property states allow a surviving spouse to receive half of the decedent’s property.
Property Held in Joint Tenancy or Tenancy by the Entirety
If you find a reference to joint tenancy or joint tenancy with right of survivorship, this means that the decedent likely held the asset in joint tenancy with someone else. As a result, if the other joint tenant still lives, they will automatically receive the decedent’s share of the property without going through probate. Each joint tenant has an equal share of the asset. The language required to create a joint tenancy varies from state to state, so you may need to consult a lawyer to determine whether the language in a document suggests a joint tenancy or another form of ownership, such as a tenancy by the entirety.
A tenancy by the entirety applies only to married couples in certain states or couples in a civil union or domestic partnership in those states. Some states make it available only for real estate. Property in a tenancy by the entirety goes to a surviving spouse without the need for probate. The title document or deed may state that the property was held in a tenancy by the entirety, or state law may presume that a married couple held it in this way. Again, you can consult a lawyer to understand the legal presumptions in your state.
If there is no reference to a specific type of ownership in the title document, the asset likely was held in a tenancy in common. This does not provide a right of survivorship, and the decedent’s share of the asset will be distributed through a will or trust.
Property Held as Community Property
In a community property state, a couple may have been able to hold title to an asset as community property with right of survivorship. This means that a surviving spouse automatically will receive the decedent’s share of the asset without going through probate, regardless of whether the decedent’s will provides otherwise.
Even if an asset was not specifically held as community property with right of survivorship, it may be classified as community property under state law, whether or not it was owned in the name of one or both spouses. Most assets that either spouse accumulates during the marriage are counted as community property, in addition to assets bought with income earned during the marriage. However, gifts or inheritances for one spouse during the marriage remain separate property, as do assets that either spouse acquired before the marriage. (This can change if separate assets are commingled with community assets.)
A decedent can leave their half of the community property to anyone, not necessarily the surviving spouse. If they do leave it to the surviving spouse, it can be transferred through a simplified probate process. If the decedent did not specifically leave it to someone other than their spouse, the spouse will receive it automatically.
Community Property States
*Note: In Alaska, South Dakota, and Tennessee, spouses can opt into the community property system.
Special Situations Involving Community Property
A handful of states, including Texas and Washington, allow couples to make community property agreements. These provide that a certain asset is separate property or community property, notwithstanding how it would be classified under state law. As a result, some couples agree to consider all of their property community property upon the death of the first spouse. A community property agreement will trump a conflicting provision in a will, since it is a binding contract. States differ on whether a community property agreement can provide for a third party to inherit the community property when the second spouse dies.
In a few states, such as California, assets that were acquired in a state that did not follow community property rules will be treated in the same way as community property if the assets would have been community property had they been acquired in a community property state.
Property Held in a Living Trust
Sometimes an individual will try to avoid probate by putting their assets in a living trust. You should record the trust property in your inventory and get an estimate of its value to determine any federal estate tax liability. You should review the trust document and the schedule of assets attached to it to determine the scope of the trust. Any items contained on the schedule must be actually owned by the trustee to be transferable as part of the trust. You will need to transfer the trust property to the beneficiaries if you have been named as the successor trustee of the trust following the decedent’s death.