What determines whether something passes through probate or avoids it?

Probate is the legal process through which a deceased person's estate is administered and distributed. Whether an asset passes through probate or avoids it is primarily determined by how that asset is structured in terms of transfer upon death.

When an asset passes by contract, it means that there is a predetermined agreement that specifies how that asset is to be transferred, such as through joint ownership or a payable-on-death designation. These arrangements allow the asset to be transferred directly to the beneficiary without going through the probate process. On the other hand, assets that are solely in the name of the deceased and do not have a contractually specified benefactor often require probate for distribution.

Understanding the nature of asset transfer is crucial for effective estate planning, as strategies that utilize contractual arrangements can significantly simplify the process for heirs and reduce delays and costs associated with probate. This highlights the importance of employing proper planning tools to ensure efficient transfer of assets upon death.