Probate ensures that a decedent’s assets are distributed to the right people. This process is generally required in South Carolina, but it isn’t in every situation. A retirement account is generally exempt from having to pass through probate if the owner meets certain conditions.
The probate option
A retirement account may or may not pass through the probate court. Whether or not the account ends up in probate depends on the decisions made before death. Overall, avoiding the probate process is designed to keep legal matters out of court.
During the process, the probate court determines the validity of a will. The deceased person’s estate is distributed to specific individuals or companies, according to the terms of the will. It is a public process that allows additional people to challenge the will and takes longer than directly transferring the assets to the inheritors.
Choosing beneficiaries
Selecting beneficiaries is a method of avoiding probate. The retirement account holder has to name one or more beneficiaries, such as a spouse, family member or friend, to receive the assets after death. Without naming at least one beneficiary, the retirement account and other assets go through the courts. A primary beneficiary is usually named along with two or more other beneficiaries in case the primary dies or is unavailable.
Not all types of personal assets are required to go through probate. A retirement account that has beneficiary designations is not required to undergo the process. These accounts include 401(k), IRAs and life insurance policies. In general, selecting a beneficiary, such as a family member or business associate, prevents retirement funds from going through the probate court.