Many of our clients approach us for advice on avoiding probate to settle their estate. Luckily, it is possible to avoid probate in California!
Sometimes, estates are small enough in value or have little enough assets to avoid probate. Furthermore, other estates can avoid probate in California with proper pre-death planning. While an existing estate plan is the best way to avoid probate, what happens if the decedent never created one?
When Can You NOT Avoid Probate?
In addition to distributing an estate to proper beneficiaries, the probate process also clarifies any issues or contradictions within a will. Plus, probate can resolve challenges to the distribution of the estate’s assets.
For the purpose of this article, “probate” refers to a full probate and not one of the alternate small estate proceedings that could be used to settle smaller estates.
You can determine what you need by considering three key components:
- the type of property the decedent owned;
- the value of that property; and
- how the decedent held title to the property.
Below are common reasons for probating an estate:
- When no will exists
If an estate has assets valued over $166,250 requiring probate without a will, probate is necessary. Probating the estate will determine the beneficiaries and the assets they will receive.
- When a valid will exists
An estate will have to be probated if a valid will exists and the estate has assets requiring probate that are valued over $166,250. Probating the estate will validate the will and distribute the assets according to its terms.
- When there are mistakes in a will
The will must go through probate if mistakes are present, such as in a fraudulently executed will.
Additional Reasons for Probate
An estate must also go through a full probate if the decedent owned property as a tenant-in-common and the value of decedent’s interest is over $166,250. Additionally, probate may be necessary when beneficiaries have predeceased the decedent or challenge the distribution of the estate’s assets.
Assets Subject to Probate
Property held as tenants-in-common is subject to probate upon the death of one of the owners.
Holding title in tenants-in-common is different than holding title in joint tenancy or community property with right of survivorship. Therefore, the outcome upon death does not automatically transfer to the surviving owners. Examples of tenants-in-common property include bank and investment accounts, stocks, bonds, vehicles, boats, planes, real estate, and business interest.
If two or more people own these types of assets without designation of the type of ownership, they will automatically split ownership equally. Additionally, when more than one person’s name is on title to an asset, they are assumed to be tenants-in-common unless there is designation to the contrary.
For example, real property held in the name of “Joe Smith, an unmarried man, and Sara Jones, an unmarried woman” would be considered owned 50% by Joe and 50% by Sara as tenants-in-common with no right of survivorship. On the other hand, if title was “Joe Smith, an unmarried man, and Sara Jones, an unmarried woman, as joint tenants,” if either Joe or Sara died, the remaining owner could easily transfer the deceased owner’s share of the property to the surviving owner without probate.
Revocable living trusts, pay-on-death accounts and registrations, and gifts are not subject to probate.
How Can You Avoid Probate?
Not all wills have to go through the full probate process in California. In fact, California probate law provides several different processes, both in and out of court, to settle estates.
That being said, custodians must admit all wills with the local court for safe-keeping, whether or not they file a probate. Probate Code Section 8200(a) provides, in part:
Unless a petition for probate of the will is earlier filed, the custodian of a will shall, within 30 days after having knowledge of the death of the testator, do both of the following: (1) Deliver the will to the clerk of the superior court of the county in which the estate of the decedent may be administered and (2) Mail a copy of the will to the person named in the will as executor, if the person’s whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person’ s whereabouts is known to the custodian.
Some beneficiaries or other claimants of the estate may choose to open a probate case to give notice, make claims, or address any debts or existing credit claims.
The simplest way to avoid probate is to plan for the future and create a living trust before you die. A living trust will place your assets and property “in trust” managed by a trustee for the benefit of beneficiaries.
As trustee of your trust, you will keep all rights and ownership of the property during your lifetime. The trust simply defines how you want your property distributed upon your death.
When property is in a trust, assets are easily distributed to the beneficiaries without probate and estate taxes.
Other Ways to Avoid Probate
Individuals can also avoid probate of their estate if they:
- name pay on death (POD) beneficiaries on retirement and bank accounts;
- hold real property as joint tenancy with a right of survivorship; or
- designate a transfer on death beneficiary on California’s new transfer on death deed.
However, note that holding title to an asset in these manners does not dismiss the importance of proper additional pre-death planning nor necessarily eliminate the need of a living trust.
How Can You Avoid Estate Taxes?
Luckily, many people will not need to worry about estate tax liabilities. In fact, only the wealthiest estates are required to pay estate tax as it is assessed only on the portion of an estate’s total value that exceeds a specified exemption level.
For very large estates, California provides some tax avoidance actions to cut the potential estate tax liability. These actions include maximizing gifting during lifetime or setting up a charitable trust. Consult an attorney to discuss more complex pre-death planning if you expect your estate is valued over 11 million dollars.
Probate can be an arduous task for surviving heirs and beneficiaries. Contact A People’s Choice at 1-800-2747-2780 for more information about how to avoid probate in California. Our experienced staff is available by phone to answer your questions.