Avoiding probate for forgotten assets requires proactive estate planning and diligent record-keeping, as unclaimed property is surprisingly common—estimated at over $41.7 billion in unclaimed assets as of January 2023, according to the National Association of Unclaimed Property Administrators (NAUPA). These assets can range from uncashed checks and old savings accounts to stocks, dividends, and insurance policy proceeds, all of which can become tangled up in the probate process if not properly addressed in your estate plan. A comprehensive approach, including beneficiary designations and a thoughtfully crafted trust, is essential to ensure these forgotten assets pass seamlessly to your heirs, sidestepping the often lengthy and costly probate procedure.
What types of assets are often “forgotten” and subject to probate?
Many assets easily fall into the “forgotten” category, particularly those that aren’t actively managed or regularly reviewed. These include dormant bank accounts—those with no activity for a certain period (typically three to five years)—unclaimed dividend or interest payments from investments, uncashed checks, and refunds due from various entities. Insurance policies, especially life insurance or annuity contracts, can also become problematic if beneficiary designations are outdated or if the policyholder fails to inform their estate planning attorney of its existence. Furthermore, safe deposit box contents, digital assets like cryptocurrency or online accounts, and even small stock portfolios can be overlooked, contributing to the overall probate burden. According to a recent study, approximately 1 in 10 Americans have unclaimed property worth over $100.
Can a trust help me avoid probate on these types of assets?
A revocable living trust is a powerful tool for avoiding probate, not just for major assets like real estate and large investment accounts, but also for these smaller, often overlooked items. By transferring ownership of these assets into the trust during your lifetime, you effectively remove them from your probate estate. The trust document specifies how these assets should be distributed to your beneficiaries after your death, bypassing the court system altogether. It’s crucial to fund the trust properly—meaning transferring legal ownership of the assets—to ensure its effectiveness. A well-drafted trust will also include provisions for addressing forgotten assets, such as instructing the trustee to search for unclaimed property on your behalf, ensuring no stone is left unturned.
I heard about beneficiary designations – how do they work with forgotten assets?
Beneficiary designations are perhaps the most straightforward way to avoid probate for certain assets, especially those with built-in beneficiary forms, like life insurance policies, retirement accounts (IRAs, 401(k)s), and sometimes even bank accounts. These designations supersede any instructions in your will or trust. However, it’s vital to keep these designations up-to-date, reflecting any changes in your marital status, family composition, or desired distribution plan. I once worked with a client, Mr. Abernathy, who had meticulously drafted a trust, but failed to update the beneficiary designation on his life insurance policy. Upon his passing, the policy proceeds went directly to his ex-wife, creating a significant and easily avoidable complication for his family.
What if I discover unclaimed property *after* a loved one has passed away?
Discovering unclaimed property after a loved one’s death can be frustrating, but it’s not necessarily a lost cause. Each state has an unclaimed property office or website where you can search for assets belonging to the deceased. You’ll typically need to provide documentation, such as a death certificate and proof of your relationship to the deceased, to claim the funds. However, if the amount is significant and the estate is already in probate, claiming the assets may require a court order or an amendment to the probate proceedings. I recall a case where a client, Mrs. Eldridge, discovered her father had a small unclaimed dividend check from a stock he’d owned decades ago. By following the state’s procedures and providing the necessary documentation, she was able to successfully claim the funds and distribute them to her siblings, adding a small but meaningful gesture to the resolution of her father’s estate. Proactive estate planning, combined with diligent record-keeping and regular reviews, is the best way to ensure all assets—even the forgotten ones—pass to your heirs smoothly and efficiently, avoiding the time, expense, and emotional burden of probate.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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