An executor is the individual or entity tasked with administering a deceased party’s estate as directed by his or her will. An executor’s duties include settling the estate’s debts, selling estate property, and distributing the estate’s assets to heirs and beneficiaries according to the decedent’s will. In this article, we discuss how to handle retirement accounts in an estate as an executor.
What is Probate?
Probate is a court-administered legal process that takes place after a person dies. The probate process involves validating the deceased person’s will and administering his or her estate, which includes paying outstanding debts and distributing assets to beneficiaries.
How Probate Affects Assets
Not all of a person’s assets are subject to probate. The assets that usually go through the probate process are those owned solely by the decedent and not designated to directly pass to beneficiaries. Examples of property that typically goes through probate include individually owned bank accounts, personal property, and real estate held in the deceased party’s name alone.
Retirement Accounts and Probate
Retirement accounts, including pension plans, 401(k)s, and IRAs, generally don’t go through probate if they have designated beneficiaries. When a retirement account is established, the party establishing the account is usually asked to name one or more account beneficiaries. Such beneficiary designations take precedence over the instructions in a will and permit the assets to bypass the probate process entirely.
Retirement Accounts Usually Avoid Probate
Retirement accounts usually avoid probate for the following two reasons:
Beneficiary Designations: When a person designates a beneficiary for his or her retirement account, the account automatically transfers to the beneficiary upon that person’s death. This direct transfer of the account eliminates the need for the account to go through probate.
Account Agreements: The agreement a person signs when opening a retirement account usually includes terms that ensure that the account transfers directly to a beneficiary outside of the probate process.
Exceptions
Although retirement accounts typically avoid the probate process, there are some possible exceptions:
No Beneficiary Designation: If a retirement account fails to name any beneficiaries, then the retirement account may have to go through probate. In this situation, the account would either be distributed according to the decedent’s will or pursuant to the state’s intestacy laws.
Estate as Beneficiary: If an individual names his or her estate as the beneficiary of a retirement account, then the account will have to go through probate. However, this generally isn’t recommended due to possible tax implications and the complexity of the probate process.
Contested Beneficiary Designations: Finally, if a beneficiary designation was contested and deemed to be invalid by a court, then this could cause the account to have to go through the probate process.
Contact a Probate Administration Attorney
If you need assistance with probate administration in California, the experienced attorneys of Biddle Law are here to help. Biddle Law works closely with executors throughout the estate administration process to ensure legal compliance and the efficient distribution of assets. When you come to us for assistance, we will be by your side each step of the way. Please contact us today for a consultation with an experienced probate administration attorney.