Probate can be a hassle—both in time and in money as well as for some additional reasons. If you want to save your loved ones the problems which are often associated with probate, there are ways you can do so with the help of a California estate planning attorney. Many Californians are at least somewhat in the dark regarding the probate process, which is a legal process through which a decedent’s assets are distributed according to a will or, in the absence of a will, through California probate laws. Under probate, the wishes of the deceased are determined, debts paid, and property distributed. There are many misperceptions regarding the issue of probate, most notably that by avoiding probate you avoid estate taxes and that probate is only required when a person dies without a will. (Neither of those are true).
Why Would You Want to Avoid Probate?
You may wonder why you would want to avoid a California probate. The first reason is that probate can lead to unnecessary expenses. Probate is a court-administered process therefore an attorney is typically involved, and an executor must be present to direct the procedure. The attorney as well as the executor will receive fees from the estate. These fees are set by the state of California yet can still be significant. The “typical” fees are 4% to the executor and the attorney for the first $100,000 in assets, 3% of the next $100,000, 2% of the next $800,000 and 1% of the next $15,000,000. If an heir is serving as executor, the fees for that role can be waived, however there will additionally be court fees, appraisal fees and other expenses associated with the probate process.
The second reason to avoid probate is time. Probate can last from six months to two years. During this time, the intended heirs have no access to their inheritance. Probate is filled with court-administered procedures, and the courts typically move slowly. Probate is a public process, since all the documents associated with the probate are available to the public. This means that the value of the decedent’s assets is available to the public as well as the beneficiaries and any conditions associated with the receipt of assets. Many people feel the probate process results in a loss of control in that when no will exists a California judge will make decisions regarding how assets are to be distributed. An obvious choice to the judge might be the very last person you would want to receive your assets or become executor of your will.
How Can You Avoid Probate in California?
There are several legal mechanisms in the state of California that can allow you to set up your estate in a manner that will avoid probate for your loved ones. Those legal avenues include the following:
- You can hold your assets in a revocable or irrevocable living trust. Virtually all your assets can be held in a trust; you can name yourself as trustee, as well as a successor trustee in the event of your incapacity or death. The ownership of your property will be transferred to yourself as the trust trustee, then upon your death the successor trustee can transfer your property to your named beneficiaries without going through probate.
- You can gift property to others while you are alive. Any property you transfer to others during your life will not be a part of the probate process after your death. It is necessary to think about the effects of a gift tax and income tax for any significant gifts.
- You can title assets in joint tenancy with another person. Once assets are titled in joint tenancy, they include the right of survivorship—the asset will be owned entirely by your surviving joint tenant upon your death. This will entail recording the death certificate and an affidavit at the county recorder’s office. Real and personal property can be titled under joint tenancy, however bank accounts cannot.
- You and your spouse can hold title to real property as community property with right of survivorship. Joint tenancy, by its very definition, includes the right of survivorship, however community property must contain the words “with right of survivorship” or it does not pass by survivorship. In that case, at the death of one spouse, only half of the deceased spouse’s community property would go to the surviving spouse.
- You can use a Real Property Revocable Transfer on Death Deed. The state of California allows a revocable transfer on death deed through January 1, 2021. The Transfer on Death Deed is comparable to a transfer-on-death or pay-on-death bank account. Because Revocable Transfer on Death Deeds can have many statutory requirements, it is essential that you seek the assistance of an experienced California estate planning attorney before using this type of deed.
- You can have payable-on-death designations on your bank accounts. For savings accounts, checking accounts and CDs, the state of California allows payable-on-death designations whereby you control the money until you die, then your payable-on-death beneficiary inherits whatever is in the account with no probate required. The beneficiary must only go to the bank with ID and a death certificate.
- You can designate stocks, bonds and brokerage accounts as Transfer-on-Death securities. When you register ownership of your stocks, bonds or brokerage accounts, you will take ownership under a beneficiary form which names a beneficiary, and, upon your death, the beneficiary can take ownership without going through probate.
- You can have multi-party accounts. A multi-party account provides that when one person named on the account dies, the funds in the account are owned by the remaining individuals. It is important to note that when money is deposited in a multi-party account, all those on the account have access to the money, even before a death occurs. Such an account can also make all parties on the account vulnerable to creditors associated with any of those named on the account. A joint account could also affect eligibility for Medicaid, so it is important to think carefully about a multi-party account.
- If the value of the estate is $166,250 or less, you can use simplified procedures under the California Probate Code thereby avoiding probate. All the assets owned by the decedent are totaled (other than life insurance, 401(k)s, IRAs, living trust assets and joint tenancy assets), and if the total is $166,250 or less, then no probate is required.
How the Gullotta Law Group Can Help You Avoid Probate
In addition to the methods of avoiding probate listed above, your experienced estate planning attorney from the Gullotta Law Group can explain other methods for avoiding probate. Our attorneys are well-versed in California probate laws as well as all issues associated with estate planning. We want to help you create an estate plan which will work for you now and will have the effect you desire following your death. Contact the Gullotta Law Group today.