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Are an IRA or Life Insurance Part of Probate?

Jar labeled IRA filled with money

Figuring out which property does and does not go through probate when a person dies can be quite confusing, especially when the person had a lot of assets. While it makes sense that a person’s estate would go through the probate process, assuming there isn’t a trust set up, what happens to things like their IRAs or life insurance policies? Are they included in the probate process?

What is Probate?

First, it is essential to understand what probate is. After someone dies, their estate enters probate. Probate is process in which the decedent’s assets are distributed to bill collectors, unpaid taxes, and heirs. While it is court-supervised, the court usually won’t get too involved unless there is a dispute over the estate. Florida’s probate process is somewhat easier than other states. Florida is 1 of 16 states who have adopted the Uniform Probate Code (UPC). The UPC is a way to streamline the process, make it simpler, and give personal representatives more flexibility. 

With assets like life insurance policies and IRAs, avoiding probate is easy if the person has made beneficiary designations to those accounts. If those designations have not been made, it may become more complicated.

IRAs and Retirement Accounts

IRA and retirement accounts will stay out of probate if there are designated beneficiaries listed for each account. The beneficiary needs only provide a death certificate to the administrator of the IRA, and the administrator transfers ownership of the account to the named beneficiary. This is how probate can be avoided. However, if a beneficiary has not been named, the IRA account will be part of the probate process. This is also the case when a deceased person names their estate as the beneficiary, or in cases where the beneficiary has passed before the account holder. Naming a trust as a beneficiary is a way to keep multiple accounts up to date if your plan changes.

Life Insurance

Life insurance operates in much the same way as an IRA. If a living beneficiary is named, the policy will not be part of probate. If a beneficiary is not named, it will be part of the process. Again, a trust may not be needed to avoid probate on the policy proceeds.

There may be times when the policy or account holder chooses not to name a beneficiary. For instance, in cases where the beneficiaries are young and unable to handle the proceeds, a trust may be the way to go in order to ensure the intended heirs get the money when they are old enough to handle it. It is best to create a trust which holds the proceeds from life insurance and retirement accounts under control of a capable trustee. The trustee may invest and distribute the funds to the beneficiaries until the beneficiaries are at an age in which they are expected to be capable of handling large sums of money. Doing this will also prevent the accounts from becoming part of probate. 

Depending on what your needs are and what you are trying to do, it may be worth speaking with an experienced estate planning attorney who can guide you through the process of securing your accounts for the future. The right attorney can help you choose the right trust and make sure the accounts will be protected for your future heirs. Schedule your in person or virtual consultation today. The Mattar Firm has offices in Bonita Springs (239-222-2222) and Tampa (844-444-4444).


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