Probate is the legal process by which the court distributes a deceased person’s property to their legal heirs. But as most people are aware, probate proceedings can be lengthy and costly. Importantly, with advance planning, there are several measures you might be able to take to ensure your family avoids probate — and help keep your financial affairs private after your passing. The following are five tips on how to avoid probate in California:
In California, a living trust can be used to avoid probate for any assets and property you own. A living trust, also known as an “inter vivos” trust, is one that is created during the creator’s lifetime. When you set up this type of trust, you still have control over the assets and can make changes to the trust instrument at any time.
A living trust can be used for bank accounts, real estate, investment accounts, business interests, jewelry, retirement accounts, boats, vehicles, artwork, and personal property. If all your property is in the trust at the time of your death, you legally do not own anything in your name. Critically, this means that upon your passing, no formal court administration of your estate is necessary — the property in the living trust will pass to the beneficiaries you have named under the terms you have set up in the trust.
While the steps outlined below may also allow you to avoid probate in certain circumstances, having a fully funded trust is the most effective method to transfer your assets without court involvement.
Another way to help your family avoid going through the probate process in California is by considering how you title your property. Joint tenancy with a right of survivorship is an easy way you can keep your loved ones out of probate court and ensure your wishes are carried out when you pass.
With these types of arrangements, each joint tenant would own an equal share of your property with you during your lifetime. At the time of your death, your share would immediately be transferred to the surviving joint tenants. Additionally, if the property is titled as community property with a right of survivorship, your share would automatically be inherited by your spouse.
However, you should still be careful about using titling this way - if your joint tenant or spouse predeceases you, the property can still end up in probate court. Moreover, titling assets jointly can have creditor and/or tax implications. You should always consult an attorney to understand the full implications of how you hold title to your assets.
A payable-on-death account can help keep specific assets out of probate. All that is required to set up this type of account is to notify the bank or financial institution who you would like to inherit the funds. There is no limit on the amount of money that the beneficiary can inherit from a payable-on-death account, and they can claim the funds immediately upon the passing of the original account holder.
It’s vital to note that with a payable-on-death account, an alternate beneficiary cannot be named. However, you can change the beneficiary of the account at any point during your lifetime. While you are alive, the beneficiary can claim no rights to the assets in the account.
Again, if your named beneficiary predeceases you, this can turn into a probate asset. It is important to consult with legal counsel and consider the use of a trust.
Transfer-on-death deeds allow an individual to leave property to another without having to create a living trust. A transfer-on-death deed is easy to set up, inexpensive, and does not need to go through probate. Only certain types of property meet the criteria for these types of deeds in California, including:
Transfer-on-death deeds are fully revocable and can be altered at any time before your death. To be valid, the deed must be signed and dated in front of a notary public and recorded within 60 days from the date of the signing. When you pass, your beneficiary has 150 days to file a change in ownership statement with the county assessor. Similar to payable-on-death designations, if your named beneficiary predeceases you, the property will then be a probate asset.
In California, there is a simplified procedure your heirs may be able to take advantage of if the estate’s value is $166,250 or less — or the estate contains real estate worth no more than $55,425. To use the probate process for small estates, the beneficiary must use affidavits, and in the case of real property, file the affidavit with the superior court and obtain the signature of the court clerk. However, it's crucial to be aware that there cannot be a probate case that has already been opened, and the estate's executor must consent to using this process.
A surviving spouse can also request that community property be transferred to them without going through the formal probate process by filing a spousal property petition. In these cases, only one hearing in court is usually necessary.
Having a comprehensive estate plan in place is the best way to help ensure your loved ones avoid the hassle of the probate process. A knowledgeable trusts and estates attorney can discuss your specific circumstances and work with you to create an effective strategy. The California trusts and estates attorneys at White and Bright, LLP have decades of experience working with individuals and their families to help provide peace of mind and ensure their objectives are achieved. Call us to schedule a consultation.